Research On The Causes And Measures Of The Default Of State-owned Enterprises’ Credit Debt

In recent years,there have been many credit bond defaults in China,with a wave of credit bond defaults in overcapacity industries and a wave of credit bond defaults by private enterprises,and market risk appetite has gradually decreased.Out of risk aversion,investors turned to favor credit bonds of stateowned enterprises.However,since 2020,with the default of credit bonds of highly rated SOEs such as Brilliance Group,Shengjing Energy Development Group and Yongcheng Coal and Electricity Holding Group,the market’s "rigid faith" in SOE credit bonds has been broken.So,this paper poses the following research question: What are the causes of the frequent defaults on SOE credit bonds? What measures should be taken to prevent them in the future?The paper firstly compares domestic and foreign literature to understand the current status of theories and research on credit bond defaults.This paper then summarizes the characteristics of defaults in the credit bond market of state-owned enterprises to gain a better understanding of the default situation in it.On this basis,this paper will conduct a case study on the default of credit bonds of Yongcheng Coal and Electricity Holding Group,using the case study method,comparative analysis method and empirical analysis method to conduct an in-depth analysis of the background,default process,reasons for default,default characteristics and impact of default of this case,and summarize the suggestions based on the research findings.On the one hand,the slowdown in macroeconomic growth and the tightening of liquidity have strained local finances and the local government’s willingness to repay debts is insufficient,while the industry downturn has weakened the profitability of Yongcheng Coal and Electricity Holding Group and its profits have been seriously damaged.On the other hand,Yongcheng Coal and Electricity Holding Group’s internal problems,such as unreasonable asset and liability structure,serious related party occupation and more restricted funds,have led to an overestimation of its solvency,coupled with the weak financial support of the controlling shareholder,and the combination of these factors led to the default.After Yong Coal Group’s credit defaulted again,the bond market reacted sharply: Firstly,bond financing in Henan Province was interrupted and several bond issuance plans were canceled;Secondly,a number of institutions involved suffered penalties;thirdly,the credit spreads of local state-owned enterprise bonds,low-rated bonds and traditional industry bonds continued to rise,causing a huge impact on the bond market.The bond default of Yongcheng Coal and Electricity Holding Group exposed the problems of lack of supervision,distortion of agency ratings and irrational investors in the credit bond market.In the future,in order to effectively prevent the risk of default on credit bonds of state-owned enterprises,the author makes the following suggestions: Firstly,we should eliminate the government’s "implicit guarantee" for state-owned enterprises’ bond issuing entities,strictly review the qualification of issuing entities;Secondly,enterprises should take the word "stability" as the forefront of their operation and do a good job in managing business risks;Thirdly,regulators should strengthen joint supervision and give full play to the advantages of joint supervision to avoid regional financial risks;Fourthly,a more complete rating system should be established,which should be in line with international standards and introduce competition to continuously improve the efficiency of rating;Fifthly,the bondholder meeting system and information disclosure system should be improved to effectively protect the rights and interests of investors;Finally,investors should be urged to give up their "rigid faith" and return to rational investment.