Chinese corporate issuers have defaulted on a record CNY 116bn ($18bn) of bonds in the first half of 2021, as per data by Shanghai DZH. This is the highest ever figure for H1 and NikkeiAsia reports that average yields on foreign currency Chinese HY bonds are over 10%, the first time they have crossed 10% in over a year vs. 5% for global HY. NikkeiAsia reports that the full year figure is likely to exceed last year’s record of CNY 187bn ($28.9bn). Tsinghua Unigroup, HNA, Tianjin Airlines are a few examples of defaults from this year. SOEs accounted for almost 40% of overall defaults this year as compared to just over 10% last year with China retreating from supporting heavily burdened SOEs. The credit impulse (Term of the Day, explained below) has been declining, falling to 25% in May, the lowest since February 2020. Over $2.14tn of bonds mature by 2023, 60% more than that between 2018 to 2020. Daiwa’s Saito said, “If a sharp increase in corporate bond defaults leads to a further rise in bond yields and other broader repercussions in markets, the Chinese government will start providing direct and indirect support to debt-heavy SOEs”

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