CHINA’S State asset regulator, in the wake of increasing debt defaults, said Friday that risk in bonds issued by Central Government-owned companies is “controllable.”

    The State-owned Assets Supervision and Administration Commission (SASAC) said it made the conclusion after a detailed probe into all bonds issued by such enterprises.

    The investigations were launched after one firm, China Railway Materials Co., in mid-April sought suspension of trade in 16.8 billion yuan (US$2.60 billion) worth of its debt instruments, as the company struggles to make payments.

    Following that risk warning, the SASAC “conducted a comprehensive probe of various bonds issued by 106 Central Government-owned enterprises,” the commission said in a statement on its website.

    “While the Central Government-owned enterprises are faced with negative factors such as a slowdown of the economy, their operations are trending better and their financial indications are stable,” it said. “Overall their debt risk is controllable.”

    Chinese markets are pricing in increasing risks following an unprecedented number of defaults this year. A long list of high-yield bond issuers in the US$8 trillion domestic debt market are due to make debt payments this month.

    Yields of benchmark one-year corporate notes have jumped an average 35 basis points since late March. Benchmark five-year corporate notes have surged nearly 60 basis points since early April.

    More than 100 Chinese firms delayed or halted at least US$15 billion in onshore bond and other fixed-income issuance in April.

    Some analysts in China suggest that there is a high risk that about 500 bonds worth around 700 billion yuan could fail to make payments on their due dates. (SD-Agencies)