A new breed of Chinese vulture funds has emerged as rising corporate defaults drive up bond yields, creating a fast-growing junk bond market worth more than Rmb1.2tn ($171bn).
The boom has been fuelled by a sell-off in debt markets as issuers ranging from private factories to government investment vehicles, hurt by a slowing economy, run into trouble.
Most vulture funds buy in after issuers show clear signs of distress but before they miss any payments. A small number of investors are bolder, buying bonds that are already in default and thus at a very low price — as low as 10 cents on the dollar — in the hope of an imminent government bailout.