With China’s shadow banking system’s collateral chain’s collapsing amid government crackdowns on the ponzi, the ‘desperate for liquidity’ borrowers have increasingly turned to global capital markets’ suckers to fund the next malinvestment. As China’s currency becomes more internationalized and yields around the world collapse (thanks to central bank largesse), demand from investors has driven, for the first time ever, the Chinese corporate bond market has overtaken the United States as the world’s biggest. As S&P warns, this is raising global credit risk as “as much as 10% of global corporate debt is exposed to the risk of a contraction in China’s informal banking sector,” or around $4-$5 trillion, “causing overall corporate risk to increase globally,” and it’s not expected to slow anytime soon.
The Chinese corporate bond market has overtaken the United States as the world’s biggest and is set to soak up a third of global company debt needs over the next five years, according to rating agency Standard & Poor’s, underscoring the growing risk China’s debt market is imposing on the global financial system.
Chinese corporate borrowers owed $14.2 trillion at the end of 2013 versus $13.1 trillion owed by U.S. corporations with the switch in rankings taking place a year earlier than it had expected, S&P said on Monday.
But that is not good news for the world’s investors…
China, the world’s second-largest economy is currently financing a quarter to a third of its corporate debt through its shadow banking sector and this had global implications, S&P said.
“This means that as much as 10 percent of global corporate debt is exposed to the risk of a contraction in China’s informal banking sector,” the agency said, estimating this at $4 trillion to $5 trillion. “With China’s economy likely to grow at a nominal 10 percent per year over the next five years, this amount can only increase.”
…
“As the world’s second-largest national economy, any significant reverse for China’s corporate sector could quickly spread to other countries.”
As S&P sums up…
Cash flows and leverage at Chinese corporations are the worst among global peers, having deteriorated from being the best in 2009.
China’s large and still-expanding contribution to global corporate debt, the higher financial risk is causing overall corporate risk to increase globally,” the agency said.
It appears the authorities are starting to catch on (via SSE):
- *SHANGHAI EXCHANGE TO LIMIT INDIVIDUALS’ PURCHASE OF RISKY BONDS
- *SHANGHAI EXCHANGE TO START RISK ALERTING SYSTEM FOR CORP. BONDS
As Bloomberg reports,
Shanghai stock exchange will alert about risks for its listed corporate bonds if the issuer’s solvency is “severely affected” by violations or govt investigations, according to a statement on the exchange’s microblog.
A risk alert will be issued when:
- Bond rating hits AA- or falls below AA-
- Issuer forecasts second straight year of loss
- Issuer’s solvency is “severely affected” by changes in operations
- Individuals with less than 5m yuan of assets are banned from buying bonds with risk alerts
Coming to a gated US bond fund market near you soon…forcing the purchase of entirely unrisky stocks (since real estate speculation has already had its wings clipped)
Nothing to see here, move along (as we noted previously, the scale of China’s credit expansion dwarfs the Fed’s QE)
And if we had to show it in one chart, it would be the following comparison of total Chinese and US bank assets: the two lines shown below are on the same axis, and at the end of 2009, the US had just a fraction more assets than China.
Another way of showing just the past three years:
Since then the US has added $2.3 trillion in bank assets, exclusively thanks to the Fed’s reserve creation. As for China… total bank assets more than doubled from $11.5 trillion to a record $25 trillion! This is a number that is nearly double that of the US, and represents a pace of $3.5 trillion per year – or nearly four concurrent QEs – a rate of “financial asset” addition five times greater than in the US!
We are sure any contraction in that flow that is not subsidized by the bubble blown in corporate credit issuance or shadow-bank CCFDs will land as softly as a Ghanaian strikers’ leg on Dempsey’s nose.
上证发〔2014〕39号
各市场参与人：
为促进债券市场规范发展，防范公司债券风险，保护投资者特别是中小投资者合 法权益，根据《公司债券发行试点办法》、《上海证券交易所公司债券上市规则》、《上海证券交易所交易规则》和《上海证券交易所会员管理规则》等相关规定， 经中国证监会批准，上海证券交易所（以下简称“本所”）现就对公司债券实施风险警示的相关事项通知如下：
一、通过本所集中竞价交易系统上市交易的公司债券出现以下情形之一的，本所可以对其实施风险警示：
（一）债券最近一次资信评级为AA-级以下（含）；
（二）发行人最近一个会计年度的前一年度经审计的财务报告显示为亏损，且最近一个会计年度业绩预告或更正业绩预告显示为亏损；
（三）发行人发生严重违反法律、行政法规、部门规章或者合同约定的行为，或者被证券监管部门立案调查，严重影响其偿债能力；
（四）发行人生产经营情况发生重大变化，严重影响其偿债能力；
（五）本所认定的其他情形。
二、本所在实施风险警示的公司债券（以下简称“风险警示债券”）简称前冠以“ST”字样，以区别于其他公司债券。
三、公司债券被本所实施风险警示之日起，本所会员应当设置风险警示债券买入权限，除符合本条规定条件之外的个人投资者不得买入风险警示债券。
个人投资者同时符合下列条件的，本所会员可以为其开通风险警示债券买入权限：
（一）名下各类证券账户、资金账户、资产管理账户中金融资产价值合计不低于500万元人民币；
（二）签署风险警示债券风险揭示书。
四、本所会员可以通过营业部现场、公司网站以及网上交易系统等渠道，要求需要买入风险警示债券的个人投资者以书面或电子方式签署风险警示债券风险揭示书。风险揭示书中应当对投资风险警示债券的风险进行充分、全面的提示。
个人投资者之前已经在其他本所会员处签署风险揭示书的，本所会员应当要求个人投资者重新签署风险揭示书，否则不得开通买入风险警示债券的权限。
本所会员应当将已经签署风险揭示书的个人投资者名单提交本所，并且根据实际情况及时更新，同时妥善保存个人投资者风险揭示书签署材料，以备核查。
五、公司债券发行人应当在收到资信评级机构正式评级报告后及时公布债券评级报告。
最近一个会计年度的前一年度经审计的财务报告显示为亏损的公司债券发行人，应当在最近一个会计年度结束后的一个月内进行业绩预告，并根据实际情况及时更新。
六、公司债券发生本通知第一条第（一）项、第（二）项规定情形的，发行人应当在公布债券评级报告或业绩预告的前一交易日向本所报告，同时申请公司债券于公布债券评级报告或业绩预告之日停牌一天。
公司债券发行人发生本通知第一条第（三）项、第（四）项、第（五）项规定情形的，应当立即向本所报告，同时申请公司债券于次一交易日停牌一天。
公司债券发行人应当于公司债券停牌当日发布停牌公告及风险警示公告。公司债券于停牌日的次一交易日复牌，本所自公司债券复牌日起对其实施风险警示。
七、发行人发布的风险警示公告应当包括以下内容：
（一）债券的种类、简称、证券代码以及实施风险警示的起始日；
（二）实施风险警示的主要原因；
（三）实施风险警示期间公司接受投资者咨询的主要方式；
（四）中国证监会及本所要求的其他内容。
八、发行人、资信评级机构和知悉风险警示事宜的相关人员应当做好相关公告正式披露前的信息保密工作。如存在信息提前泄漏等情形的，本所将对相关公告披露前的交易进行核查，发现存在内幕交易嫌疑的，将上报中国证监会查处。
九、发行人未按照本通知第五条、第六条规定履行相关职责的，本所在获悉并核实相关情况后，可以对相关公司债券予以停牌，并督促发行人发布风险警示公告。 发行人未按要求发布风险警示公告的，本所可以对市场发布风险警示通知。公司债券于发行人风险警示公告或本所风险警示通知发布后的次一交易日复牌，并自复牌 日起实施风险警示。
十、因第一条第（一）项规定情形，公司债券被实施风险警示后，经资信评级机构最近一次评定，风险警示债券的资信评级上调至AA级以上（含）的，发行人可以在评级报告公告后向本所申请撤销公司债券风险警示。
因第一条第（二）项规定情形，公司债券被实施风险警示后，最近一个会计年度经审计的财务报告显示盈利的，可以在财务报告公告后向本所申请撤销公司债券风险警示。
因第一条第（三）项、第（四）项、第（五）项规定情形，公司债券被实施风险警示，相关情形消除的，可以向本所申请撤销公司债券风险警示。
十一、本所收到发行人提交的撤销风险警示申请后，视情况决定是否撤销风险警示。
十二、本所决定撤销风险警示的，发行人应当按照本所要求在撤销风险警示的前一交易日披露相关公告。
公司债券于撤销风险警示公告日停牌一天，本所自次一交易日起对风险警示债券撤销风险警示。
十三、会员应当通过营业部现场、公司网站及网上交易系统等渠道，做好本通知的宣传和解释工作，向投资者提示公司债券风险警示的相关安排和风险警示债券的投资风险。
十四、发行人和本所会员违反本通知或本所其他相关规定的，本所将视情况实施监管措施或纪律处分。
十五、本通知自2014年9月1日起施行。本所此前发布业务规则的相关规定与本通知不一致的，以本通知为准。本通知未作规定的，适用本所其他业务规则的相关规定。
特此通知。
附件：风险警示债券风险揭示书必备条款
上海证券交易所
二○一四年六月十七日
