Via Zero Hedge:
Just days after China’s “moment of reckoning” in the dollar bond market arrived, when China was rocked by not only the biggest dollar bond default in two decades but also the first default by a massive state-owned commodities trader and Global 500 company, when Tianjin’s Tewoo Group announced the results of its “unprecedented” debt restructuring which saw a majority of its bondholders accepting heavy losses, and which according to rating agencies qualified as an event of default, last week a top adviser to China’s central bank warned of a possible “chain reaction” of defaults among the country’s thousands of local government financing vehicles after one of these entities nearly missed a payment this month.
As the FT reported, Ma Jun, an external adviser to the People’s Bank of China, called on the government to introduce “intervention mechanisms” to contain the risk associated with LGFVs — special entities used in the country to fund billions of dollars of roads, bridges and other infrastructure.
