China’s corporate bond market is a study in contradictions: defaults are rising sharply, but so is new issuance. Lower yields and PBOC monetary easing have encouraged more firms to sell bonds, but more defaults are also expected this year as credit conditions vary starkly across industries and provinces, and overall credit growth is still modest. Beijing’s push to stabilize infrastructure spending in 2019 has restored market confidence in local government financing vehicles and their bonds, while the property sector will be a prominent source of credit risk this year.
