Implicit guarantees are ubiquitous in China, but one company went a step further when it appealed to the central bank to give an explicit reassurance to creditors that the government will not permit any default.
China City Construction Holding Group Co saw yields on its Hong Kong-traded “dim sum” bonds spike recently after a surprise privatisation, highlighting the ways moral hazard distorts capital allocation in the world’s largest economy.
CCCC was previously owned by a unit of the housing ministry, but a private equity fund took control late last month following a complex asset restructuring.
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