China bond market may see default by a state firm

Shanghai

FOR two years Premier Li Keqiang has vowed painful state sector reforms that may feel like slashing one's own wrist. That resolve is about to be tested in China's bond market.

Baoding Tianwei Group Co, a unit of central government-owned China South Industries Group Corp, said on April 14 there's uncertainty it can make an 85.5 million yuan (S$18.6 million) interest payment on Tuesday because of "huge losses" last year in its alternative energy business. The BB rated notes due April 2016 have dropped 6.7 per cent this month to 85.65 per cent of par, the most since they were issued in 2011.