Shanghai Chaori Solar Energy defaults on bond issue
Solar cell producer the first company to fail to make interest payment on a mainland debt paper, triggering fears it will lead to a financial crisis
Shanghai Chaori Solar Energy Science & Technology yesterday became the first company to default on a bond on the mainland.
The solar cell maker was unable to cover an 89.8 million yuan (HK$113.7 million) interest payment that came due.
The mainland share market took the widely expected default in its stride - the CSI 300 Index closed just 0.24 per cent lower - but concern is building about contagion-fuelled liquidity risk.
Speaking on the sidelines of the National People's Congress in Beijing, Ouyang Zehua, an official with the China Securities Regulatory Commission, said the watchdog would keep a close eye on any contagion stemming from the default.
"We will focus our attention on whether it will trigger regional or even systemic risks. This is what Premier Li Keqiang has repeatedly stressed in his government report that the financial system needs to safeguard the bottom line against regional and systemic risks," Ouyang said.
A Bank of America Merrill Lynch report said the default could mark China's "Bear Stearns moment", a reference to the US firm that failed in 2008 and ignited the global financial crisis.