Working Paper: CEPR ID: DP15135
Authors: Ronald W. Anderson
Abstract: This paper analyses of how risk is allocated in China's markets for debt issued by non-financial enterprises. Compared to other major corporate bond markets China's is unusual in that unlisted, state-owned enterprises account for a large fraction of the debt issued and that the foundations of the corporate and bankruptcy law are young and still evolving. The implications of these features are described and quantified. The results show that the major changes in relative pricing across different market segments cannot be explained well by standard measures of solvency and liquidity. Rather, the most successful explanation is that major policy actions have had the effect of withdrawing implicit guarantees from private issuers and making more explicit the limits of guarantees afforded to state issuers.
Keywords: Corporate Bonds; Chinese Securities Markets; Implicit Guarantees; State Capitalism; Bankruptcy Reform
JEL Codes: G3; H2; K4; P2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Policy changes (J18) | Risk perceptions and pricing of debt (G19) |
| State's involvement as a third agent (L85) | Complication of creditor-shareholder dynamic (G32) |
| State's interventions (H77) | Mitigation or exacerbation of risks faced by creditors (G33) |
| Unique characteristics of the Chinese market (F61) | Influence on risk allocation (G32) |