How Can Banks Possibly Absorb All These Defaults?
The uncertainty as China’s lenders come to realize the size of the risks they’re sitting on will be brutal.
The anxieties go well beyond Baoshang Bank Co. this time.
Photographer: Bloomberg
Chinese defaults are back and looking messier. Creditors are losing hope, and the banks are getting worried.
After a regional state-owned enterprise with a AAA credit rating, Yongcheng Coal & Electricity, failed last week to pay 1 billion yuan ($151 million) on a short-term bond, jitters rippled through the bond and money markets. Share prices of Chinese banks also took a beating. Regulators unexpectedly didn’t intervene, putting investors on edge: Policy makers may be done with their Covid-19 sympathy and forbearance, making state bailouts no longer a fail-safe.