Manufacturer becomes first SOE to default on domestic bonds

State-owned Baoding Tianwei Group became the first such firm to default in China’s domestic bond market when it announced that it had missed a Tuesday deadline to pay roughly US$14 million in interest due on bonds worth US$242 million, The New York Times reported. The power equipment manufacturer’s default calls into question the popular assumption that state-owned enterprises in China still have implicit government backing and easy access to cheap sources of debt funding regardless of their financial fundamentals. “I think it’s probably just the beginning,” said Ying Wang, a senior director of corporate ratings at Fitch Ratings in Shanghai.