Xinhua recently reported on a warning regarding the scale of China’s unliquidated bonds. The Asian Development Bank (ADB) issued the warning in a report on its findings after monitoring all bonds. As of the end of September, China’s unliquidated bonds reached RMB 23 trillion yuan, which is the equivalent of fifty percent of China’s total GDP. The report suggested that the proportion of unliquidated bonds equals about half that of the bonds for the entire “Emerging East Asia Region.” Among the 23 trillion, 17 trillion are government bonds, while 7 trillion are corporate bonds, which is a rapidly growing section in China’s bond market. The ADB called for caution against the potential risks. The top ten corporate bond issuers are all China’s national level state-owned companies. Zhu Haibin, J.P. Morgan Chase’s Chief Economist for the Chinese Market, suggested that corporate bonds are becoming the primary new borrowing channel for local governments given the environment in which land sales for real estate developments have suffered a sharp decline.
Source: Xinhua, November 26, 2012