A Chinese solar company is threatening not to pay interest on a corporate bond, setting off alarms in the financial system, but analysts said Wednesday that a default could improve transparency.

Shanghai-based Chaori Solar Energy Science & Technology Co. said it was unable to make interest payments of 89.8 million yuan ($14.7 million) due Friday on a bond issued in 2012, according to a statement issued late Tuesday through the Shenzhen stock exchange where it is listed.

Some analysts have described it as China's first default for an onshore corporate bond.

The China Business News said it was the country's first "substantive" default since a steel company, Angang, had previously delayed interest payments and so-called "collective bonds" issued by groups of small enterprises had also missed payments.

But analysts said a Chaori default would help build a healthier market in the long term.

"It's a good thing, as a normal economy needs those defaults to better price bonds and other debt products," said Lu Ting, an economist for Bank of America Merrill Lynch.

"Defaults of some debt products are definitely not on a similar scale to a collapse of a major financial institution," he said in a research note. "Corporate bonds and incoming trust loan defaults won't lead to credit crunch."

The news came after worries earlier this year over financial products issued by China's roughly 65 trusts, which have drawn comparisons to American "junk bonds" of the 1980s.

In one case a $160 million investment product structured by Jilin Province Trust and backed by a coal firm failed to repay capital and interest five times by mid-February.

Separately, a $500 million investment product structured by China Credit Trust avoided default after an unknown party made good on principal payments to hundreds of investors, though they have not received pledged interest.

That product was also backed by a loan to a coal firm, and sold by China's largest bank ICBC.

Zhang Gang, an analyst with Central China Securities, told AFP on Chaori: "In the short term there will be some impact, but as to the whole financial system, the emergence of some defaulting companies will help everyone raise their risk expectations."

Chaori has been suspended from trading on Shenzhen's small- and medium- enterprise board since February 19. It last traded at 2.59 yuan.