Bond market prices in China suggest the smallest likelihood of companies being allowed to go bankrupt in seven years, despite the Chinese government's pledge to eradicate zombie companies earlier this year after a number of unexpected debt defaults by large state-owned enterprises. The Shanghai Composite Index has fallen more than 10 percent since mid-June, and is down about 5 percent from its peak on July 6. The seesawing appears to be riding on the back of concerns that while China attempts to toughen its stance state-owned company defaults could undermine investment, which is already at a 16-year-low.
Bond market prices in China suggest the smallest likelihood of companies being allowed to go bankrupt in seven years, despite the Chinese government's pledge to eradicate zombie companies earlier this year after a number of unexpected debt defaults by large state-owned enterprises. Contradictory messages and swings in sentiment are liable to prey on investor confidence and increase the risk of financial instability in debt markets. The seesawing appears to be riding on the back of concerns that while China attempts to toughen its stance state-owned company defaults could undermine investment, which is already at a 16-year-low.