China Bond Market
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Started by wglassfo - Nov. 16, 2020, 2:57 p.m.

For those of you that have read Bloomberg and the china bond market 

 It seems a state run coal mining Co. has defaulted  on a bond payment of some significant size. That was followed by more bond defaults, from other Co's. The financial statement from the previous month showed AAA credit rating and adequate cash, for the mining Co.. Suddenly the next statement showed not enough cash to meet the bond payment. Plus assets being sold off

Some of these bonds of various Co.s now have a market value of 20-25 cents on the dollar.

The unknown is if  the PBOC will step in and bail out the defaulting Co's of which there are many and what is the status of other smaller miners and other smaller manufacturing sectors..

Unless there is a bail out, people familiar with such financial matters expect the chinese bond market too fail to attract foreign or any investment. As you know chinese bonds pay some 5% plus int rate and are an important investment part of numerous portfolios

My question is: 

Is China really  the next financial power house of the world. I know bond defaults can happen but we were told that any state run Co. had the full backing of the PBOC. What if the PBOC can't bail out with out devaluing the currency, as the failing Co's are more numerous than we thought and over whelm PBOC. Is china completely or mostly dependent on foreign investment which, if this investment dries up then china is not the financial and manufacturing power house we all were led to believe, due to a lack of capital.

If china were to raise large amounts of capital by selling USA treasuries then those bills would suffer a loss of value. The treasuries could be used as collateral but in the world of finance a whiff of uncertainty can really up set the apple cart

It may be china is having a catch 22 moment or mis allocation of funds, spending on the  military and the silk road, thinking foreign investment will keep  the home fires burning. That foreign investment may disappear in a moment, unless the bond market is made whole, with no currency debasement

One wonders what we don't know about china

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