More defaults are inevitable in China's bond market but most issuers still maintain pricing power due to ample funding channels and policymakers' easing measures, market players say. The value of dim sum bond issuance this year is about 50 per cent less than that of the same period last year, reflecting investor jitters after a number of bond defaults, both onshore and offshore. While more defaults are likely, investors and issuers are shrugging off the negative impact and are coming back to the market, said Clifford Lee, head of fixed income at DBS. "Defaults will happen. But the good thing is that you will see the market get used to it and price it in," said Lee, adding that a major deal could be completed by the end of this month to kick-start the market. He did not disclose the name of the issuer. In April, the average yield of offshore yuan bonds declined 35 basis points, the biggest drop in 20 months, according to HSBC. As a result, the total return in US dollars of overall dim sum bonds erased the 0.2 per cent loss in the first quarter to record a 1.1 per cent gain in the first four months this year. "Maybe after there is a default, there is higher demand for higher return for risks. But it can't be a one-player decision; it's a market decision," Lee said. "[The issuers] see the markets as choppy with some near-term risks that are coming up. They could pull back the borrowings and go back to the banks. Investors then have to ask for lower yield and the market restarts from there." Data provider EPFR Global says net inflows into Chinese bonds over the past three weeks have totalled US$493 million, suggesting that foreign investors are pouring money back into a market that had stalled amid the default concerns. "Now issuers are coming back … with the foreign exchange situation stable and liquidity back in the system," Lee said. "In the earlier part of this year, there was liquidity in the offshore renminbi market. Volatility in the market was high as so many bonds were selling off." One characteristic of the offshore bond market is that the investor base is much more international than most local-currency bond markets, with investors from international asset managers, hedge funds and private banks, Lee said. The negative side of this diversified investor base is that once there is a disruption, the market sells off immediately, which was the case after China saw the first default by a state-owned firm last month. Baoding Tianwei Group, a solar equipment maker controlled by China South Industries Group, failed to pay interest to its bond holders in April. It was the fourth bond default after Cloud Live Technology Group and Kaisa Group, which defaulted in the offshore market in April, and Shanghai Chaori Solar Energy Science & Technology which defaulted in March last year. In an earlier version of this article we stated that China’s Baoding Tianwei Baobian Electric Co Ltd had defaulted on its debt. This should have read Baoding Tianwei Group. We apologise for the error.