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Analysis of Frequent Bond Defaults and Relevant Suggestions(No.101, 2016)


By Wang Yang, Research Department of Finance, DRC

Research Report No.101, 2016 (Total 4984) 2016-8-5

Abstract: Since 2015, as the economic downward pressure grows, the bond defaults of enterprises have increased, especially in this year. Breaking the rigid payment is necessary for the healthy development of the bond market. Currently, bond defaults have limited impact on the market because it has gradually become adapted to bond defaults with adjusted expectations. With the advance of economic downward pressure, the structural adjustment and the reduction of production capacity, it is anticipated that bond defaults will continue to increase, and the bad debt risks need to be given adequate concern, especially in industries with overcapacity and state-owned enterprises. The improper disposal and outbreak of bond defaults may increase systemic financial risks, deteriorate the financing environment, hinder economic growth, and damage the credit environment of the market and legitimate rights and interests of investors. To promote the sound development of the bond market, the report proposes the following policy suggestions: take a proper approach toward credit debt default, break the rigid payment in an orderly and gradual manner; attach importance to debt default risks of state-owned enterprises and address default issues in accordance with the law; properly handle the urban construction investment bonds risks; and perfect response mechanism for bond defaults.

Key words: credit debt, bond default, risks