SHANGHAI, March 24 Some debt defaults could be
positive for market discipline in China and help the wealth
management products market develop in a more healthy way, an
influential state-run newspaper on Monday quoted deputy central
bank governor Pan Gongsheng as saying.
To help prevent systemic risk, "naturally occurring"
defaults may be "conducive to strengthening market discipline
constraints, correcting the behaviour of product issuers and
investors, and also conducive to the healthy development of the
wealth management market," the Shanghai Securities News quoted
Pan as saying.
Earlier this month, loss-making Shanghai Chaori Solar Energy
Science and Technology Co Ltd missed a bond interest
payment, the first such domestic bond default of its kind and an
event seen as a landmark for market discipline in the world's
The Chaori default followed a series of near misses in
recent years in which local governments stepped in at the last
minute to rescue local champions.
Speaking at a March 13 news conference, Chinese Premier Li
Keqiang signaled that the government would not ride to the
rescue of every troubled investment by saying some loan defaults
are "hard to avoid" in what he called a challenging economic
Growth in Chinese corporate debt has been unprecedented. A
Thomson Reuters analysis of 945 listed medium and large
non-financial firms showed total debt soared by more than 260
percent to 4.74 trillion yuan ($777.3 billion) between December
2008 and September 2013.
(Reporting by John Ruwitch; Editing by Shri Navaratnam)