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Investors in bonds sold in 2012 by Chaori Solar Energy Science & Technology Co., a manufacturer of solar panels, were paid as little as 3 percent of the interest that was due Friday, according to two bondholders, one of whom said he put his parents’ savings into the bonds. The company warned earlier this week it had only 4 million yuan ($660,000) and faced an interest payment of 90 million yuan ($15 million).
Until now, Beijing has bailed out troubled borrowers to preserve confidence in its fledgling credit markets. But the ruling Communist Party has pledged to make the economy more productive by allowing market forces a bigger role.
Earlier efforts to stave off defaults by other borrowers with loans from state banks or other aid prompted complaints Chinese authorities were wasting money. Critics said investors should share in losses. The implicit government guarantee also meant bond interest rates didn’t accurately reflect investment risks, a key function of bond markets.
The timing of the default was highly symbolic, coming two days after Premier Li Keqiang, in an annual policy speech to China’s legislature, said markets would play a “decisive role” in allocating credit and other resources.
http://www.moneynews.com/Markets/Chin…