Analysis On The Causes And Consequences Of Bond Default Of State-owned Enterprises

As an important part of China’s capital market,China’s bond market has entered a new stage of development and now has become the second largest bond market in the world.Compared with other countries,the government bond market has relatively strict access conditions,and the first bond default event did not occur until 2014.With the continuous promotion of the financial deleveraging policy,the subject of default has expanded to all sectors of excess capacity,and the credit risk of state-owned enterprises has been exposed after the default wave of private enterprises.On November 10,2020,Yongcheng Coal power Holding Group Co.,LTD.,a local state-owned coal enterprise in Henan Province,announced that it could not repay the principal and interest of "20 Yongcheng COAL SCP003" on schedule,and the bond was in substantial default.The incident roiled the bond market,with more than 100 issues postponed or cancelled that month.The bond default of Yongmay,a pillar local coal company controlled by the State-owned Assets Supervision and Administration Commission of Henan Province,further shattered investors’ credit expectations for government bonds.Through in-depth analysis of this typical case of bond default,this paper explores the deep causes and economic consequences of bond default of stateowned enterprises,and draws the following conclusions:Yongmei holdings bond default mainly includes external and internal reasons.External causes: 1.The decline of profitability in the macroeconomic downturn;2.The downstream demand of the coal industry is reduced,and the industry policy pushes up the cost;3.The deterioration of financing environment leads to increased financing difficulty.Internal reasons: 1.The high proportion of non-coal business drags profitability;2.The deficiency of corporate governance leads to the lack of disposable funds;3.Aggressive financial policies lead to the pressure of centralized payment.The bond default of Yongmei Holdings has brought serious economic consequences: 1.The enterprise’s own credit is reduced and financing capacity deteriorates;2.Market volatility creates a chain reaction,panic in the bond market;3.Investors suffer losses and their overall risk appetite decreases.But in the long run,it breaks the rigid payment of state-owned enterprises and accelerates the maturity of China’s bond market.This article through to the local state-owned enterprises in henan province coal forever holding bonds default case analysis of causes and economic consequences,from bonds issuance subject,rating agencies,regulators and investors suggest four angles,enrich relevant case studies and for bond issuers management risk,bond investors to identify and prevent debt risk reference Suggestions are put forward.