Surprise China Default Triggers a New Worry for Investors

A Chinese state-backed borrower’s failure to make good on a payment on a dollar bond on Friday threatens to overturn assumptions that officials would step in to avert defaults by companies closely linked to local authorities.

Qinghai Provincial Investment Group Co., an aluminum producer that was seen by some analysts as a bellwether for assessing government support due to its struggles to make payments on offshore debt last year, had failed to wire funds for a coupon payment due Feb. 22 as of late afternoon China time. That was according to an official at QPIG, as the issuer is known, who asked not to be named citing company policy. There is no grace period for a missed coupon on this note, according to the bond prospectus, suggesting it’s now in default.