China’s Surging Bond Market Puts Default Risk On Wall Street

China’s Surging Bond Market Puts Default Risk On Wall Street

Foreigners are quickly becoming a big portion of the ownership of China corporate debt. In the search for yield, China's growing corporate bond market has been the place to go for foreign investors. No emerging market debt has been sexier, based on inflow data from EPFR Global in Cambridge, Mass. If you were graphing their inflow charts, you Y axis numbers would look like Brazil 10, Mexico 10, Russia 12, Turkey 12, China, a bazillion. Guess what happens when those companies fold and Goldman Sachs GS and others are left holding the bag? Do you think China bails them out? Or do you think Washington bails them out for buying a Chinese company? Just thinking out loud here. My answer is: not Beijing. Foreign holdings of Chinese bonds accelerated from 2. 96% in September 2020 to 3. 2% in December 2020, including quasi-sovereigns issued by Chinese banks. The numbers look small as a percentage share, but the increasing foreign investor interest is due to China's aggressive pursuit to transfer some of its debt risk to foreigners. Yes, a lot of countries do this. China is new to it. But no big emerging market gets talked about more as a potential