When a state-owned coal company in central China defaulted on a bond worth $152m this month, the slip-up seemed unlikely to send tremors through the world’s second-largest economy.
Prior to the default by Yongcheng Coal and Electricity Holding Group on November 10, only five Chinese state-owned enterprises (SOEs) had failed to pay back bondholders in the first 10 months of 2020, according to Fitch Ratings — consistent with levels in recent years.
But within a fortnight, Tsinghua Unigroup, a high-profile state technology group, would also default. That prompted China’s top financial official, vice-premier Liu He, to warn borrowers that Beijing would take a “zero tolerance” approach to misconduct in financing deals, such as misleading disclosures, or attempts by companies to evade their debts.