Concerns begin to grow surrounding China’s $4 trillion bond market, the FT reports, with over half the outstanding debt reaching maturation in the next five years.
Debtors ranging from companies and state-backed corporations to sovereign borrowers have undergone a borrowing spree in recent years, helping to finance many aspects of the economy’s rapid growth. They now face the prospect of repaying $409 billion of onshore and offshore bonds this year, with the figure rising to $664 billion in 2020, according to data provider Dealogic.
For many borrowers, a further difficulty will come from higher interest rates, putting upward pressure on servicing costs.
The influence of politics on the issue of debt repayments is another factor to consider. Alex Wolf, senior emerging markets economist at Aberdeen Standard Investments said to the FT, “In terms of how China has always handled debt and credit issues, the interesting question is whether we will see political choices to allow more state-owned enterprises to default.”
The government has a history of intervention in China’s onshore corporate bond market, often granting bailouts to high net-worth debt issuers. However corporate bond defaults have begun to increase in frequency since the first case in 2014.