Understanding China’s Evolving Credit Risk Maze

33 Pages Posted: 28 Feb 2019

See all articles by Ronald W. Anderson

Ronald W. Anderson

London School of Economics & Political Science - Department of Finance; Centre for Economic Policy Research (CEPR); Sun Yat-Sen University (SYSU) - Xinhua College

Date Written: February 11, 2019

Abstract

This paper analyses factors that account for credit risk in the Chinese market for bonds issued by non-financial enterprises. By exploring a data set of covering monthly observations of individual corporate and enterprise bonds a number of important structural features of the market are seen to account for cross sectional and time series variations of yield spreads. The analysis sheds light on the issue of implicit government guarantees. The results suggest that steps taken by Chinese authorities to restructure local public finance are concentrating such guarantees to a few segments and are bringing greater financial discipline to other segments of the market.

Keywords: Credit Risk, Implicit Guarantees, Chinese Capital Markets, Local Public Finance

JEL Classification: G12, G18, G32, G33, H71, P52

Suggested Citation

Anderson, Ronald W., Understanding China’s Evolving Credit Risk Maze (February 11, 2019). Available at SSRN: https://ssrn.com/abstract=3332411 or http://dx.doi.org/10.2139/ssrn.3332411

Ronald W. Anderson (Contact Author)

London School of Economics & Political Science - Department of Finance ( email )

Houghton Street
London WC2A 2AE
United Kingdom
+44 20 7955 6204 (Phone)
+44 20 7955 7420 (Fax)

HOME PAGE: http://personal.lse.ac.uk/ANDERSOR/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Sun Yat-Sen University (SYSU) - Xinhua College ( email )

China

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