Who Bears Risk in China's Non-financial Enterprise Debt?

Ronald Anderson

No 15135, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper analyses of how risk is allocated in China's markets for debt issued by non-financial enterprises. Compared to other major corporate bond markets China's is unusual in that unlisted, state-owned enterprises account for a large fraction of the debt issued and that the foundations of the corporate and bankruptcy law are young and still evolving. The implications of these features are described and quantified. The results show that the major changes in relative pricing across different market segments cannot be explained well by standard measures of solvency and liquidity. Rather, the most successful explanation is that major policy actions have had the effect of withdrawing implicit guarantees from private issuers and making more explicit the limits of guarantees afforded to state issuers.

Keywords: Corporate bonds; Chinese securities markets; Implicit guarantees; State capitalism; Bankruptcy reform (search for similar items in EconPapers)
JEL-codes: G3 H2 K4 P2 (search for similar items in EconPapers)
Date: 2020-08
New Economics Papers: this item is included in nep-cfn
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