Anti-graft drive may prompt SOEs to be prudent

The anti-corruption campaign supports the Chinese government's goals of economic reform and rebalancing, macroeconomic stability and legal system reform. We expect that it will bring greater accountability and efficiency in the way that major State-owned enterprises are run and that it will encourage entrepreneurship over rent-seeking behavior.

Each of these factors will help place China's economy on a more sustainable long-term path. However, investors should be prepared for some event risk affecting individual companies.

Event risk is often used to refer to so-called black swan developments. Such events could affect a bond issuer's credit rating or its ability to service its debt.