Free Newsletters - Space News - Defense Alert - Environment Report - Energy Monitor
by Staff Writers
Shanghai (AFP) March 23, 2014
China's central bank hinted Sunday that it was willing to accept some debt defaults in the $1.8 trillion wealth management market, as the world's second-largest economy struggles to curb bad debts that pose a risk to the financial system.
"Under the premise of preventing systematic risks, allowing some default cases to happen naturally in compliance with market forces will... help rectify behaviours of product issuers and investors and benefit the healthy development of the wealth management market," People's Bank of China deputy governor Pan Gongsheng said at a forum in Shanghai.
Pan's remarks echoed those by Premier Li Keqiang earlier this month after the country's first-ever default on a domestic corporate bond sparked concerns that other firms could follow suit.
Li said authorities "pay very high attention" to financial and debt risks, but certain individual cases of such defaults were "hardly avoidable".
China's wealth management product market ballooned to 11 trillion yuan ($1.8 trillion) in early 2014 from two trillion yuan in 2011, Pan said.
"Guaranteed repayment... although it will ensure short-term stability, won't help the market to effectively differentiate risks and will eventually lead to accumulated risks," he said.
In early March, Shanghai-based Chaori Solar Energy Science & Technology Co said it was unable to make bond interest payments of 89.8 million yuan, sending it into a landmark default.
Earlier this year, the domestic financial market was gripped by worries over other financial products issued by trust companies, which have drawn comparisons to the American "junk bonds" of the 1980s.
Authorities have in the past intervened to avoid default risks but are now more willing to accept such incidents, which may ultimately benefit the market by raising awareness of risk and making investors more selective, analysts have said.
|The content herein, unless otherwise known to be public domain, are Copyright 1995-2014 - Space Media Network. All websites are published in Australia and are solely subject to Australian law and governed by Fair Use principals for news reporting and research purposes. AFP, UPI and IANS news wire stories are copyright Agence France-Presse, United Press International and Indo-Asia News Service. ESA news reports are copyright European Space Agency. All NASA sourced material is public domain. Additional copyrights may apply in whole or part to other bona fide parties. Advertising does not imply endorsement, agreement or approval of any opinions, statements or information provided by Space Media Network on any Web page published or hosted by Space Media Network. Privacy Statement All images and articles appearing on Space Media Network have been edited or digitally altered in some way. Any requests to remove copyright material will be acted upon in a timely and appropriate manner. Any attempt to extort money from Space Media Network will be ignored and reported to Australian Law Enforcement Agencies as a potential case of financial fraud involving the use of a telephonic carriage device or postal service.|