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China's planning agency won't allow enterprise bond defaults: newspaper

[SHANGHAI] The deputy head of the National Development and Reform Commission (NDRC) has given assurances that China's primary economic planning policy agency will not allow any enterprise bonds to default, China Securities Daily reported on Wednesday.

NDRC deputy head Lian Weiliang's remarks were made to other commission officials in a private teleconference, the official newspaper reported.

Although China's onshore bond markets have seen defaults on corporate bonds and medium-term notes over the past two years, no firm has yet to publicly default on an enterprise bond - directly approved by NDRC and typically issued by large enterprises owned by the central government, rather than local governments.

Many analysts believe the credit market prices in an implicit state guarantee for enterprise bonds because of their central government links, and any default could be alarm investors.

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There are some concerns that the debt markets could become affected by ecent volatility in China's equity markets, which have slumped by 20 per cent over the past two weeks.

Chinese corporates have been funneling large sums into the stock market over the past six months, some of it funded using borrowed money, raising concerns that the equity plunge could boost corporate debt defaults as well.