Recent Chinese bond defaults suggest more to come

Shanghai

CHINA looks set to allow more bond defaults as part of its market reform agenda, but domestic ratings agencies and bond investors are still betting that Beijing will lose its nerve, for fear of hammering its banks.

Critics say the US$4 trillion Chinese bond market, the world's third largest, has misallocated its vast sums to some of China's most inefficient companies, such as state-owned dinosaurs in sunset industries or opaque local government financing vehicles.