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China has been pursuing a deleveraging campaign.
Corporate bond defaults are rising in the country, especially among public companies.
Risk - Bond - Market - Stocks
Risk in the bond market could spread to stocks.
China's turning down the money tap, and the effects are starting to be felt in the bond market.
Policymakers - Deleveraging - Campaign - Financing - Measure
Chinese policymakers have been focused on a deleveraging campaign, with total social financing, a measure of credit growth, decelerating to 10.5% year-on-year in April, the slowest reading since 2005. The main driver of that slowdown has been a contraction in off-balance sheet lending.
That in turn has helped drive an increase in corporate bond defaults, which could cause market turbulence in the coming months, according to a team of Macquarie Research economists led by Dr. Larry Hu.
Wave - Defaults - China - RMB20tn - Bond
"A new wave of defaults in China's RMB20tn corporate bond market has caught the eyes of investors recently," Hu said. "Credit spreads have shot up to new highs over the past two years and could rise further in June."
Bond defaults increased last month, which also saw more nonpayments than the same period in years past. The default rate, which is the percentage of corporate bond defaults against the total maturing value, was 0.7%...
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