Analysis Of The Causes And Countermeasures Of The Default Of State-owned Enterprise Bonds Under The Failure Of Implicit Guarantee

For a long time,there have been unwritten regulations on rigid payment in China's bond market.It was not until 2014 that the "11 Chaori Bonds" defaulted.Because of its special status in China's economic system,state-owned enterprises have an additional layer of implicit guarantee protection.Out of faith in government implicit guarantees,investors rarely pay attention to the default risk of state-owned enterprise bonds.The existence of "high-yield,low-risk" bonds has distorted market pricing and led to uneven resource allocation.As the risk of the bond market began to emerge,regulators gradually began to pay attention to it,clearly stated that they must break the rigid payment of the financial market,and adopted "rescue but not bottom-up" measures for state-owned enterprise defaults,and advocated market-oriented and legalized measures to deal with defaults.Bonds,the government's willingness to implicit guarantees weakened;at the same time due to the accumulation of local government's implicit debt and the slowdown of economic development,the ability of implicit guarantees decreased.Although the default subjects and the amount of default in China's credit bond market have continued to increase in recent years,the disposal and risk prevention mechanisms of bond defaults are still not perfect.Due to its special characteristics,bond defaults have attracted more attention from the market and investors.As the first local state-owned enterprise in China to issue bonds in a series of defaults,the Northeast Special Steel Group has adopted a market-based disposal mechanism and bankruptcy.The successful completion of the reform plan is a successful demonstration of the removal of rigid payment and implicit guarantee.Northeast Special Steel Group is a typical local state-owned group.The controlling shareholder is the State-owned Assets Supervision and Administration Commission of Liaoning Province.It is a leading enterprise in China's special steel industry and has obvious scale advantages and strong product competitiveness.However,under the background of overcapacity in the steel industry,coupled with the continuous deterioration of the financial situation of the company,the Northeast Special Steel Group Bonds experienced a series of defaults,and the local government did not set aside their debts.In the end,Northeast Special Steel Group introduced private capital as a strategic investment.The new life was achieved by bankruptcy and reorganization.It is a good example of state-owned enterprises solving bond defaults through marketization.This article combs the Northeast Special Steel Group bond defaults in detail,and focuses on the analysis of the causes and subsequent countermeasures of the Northeast Special Steel bond defaults when the implicit guarantee fails.Firstly,the default of Northeast Special Steel Group Bonds can be attributed to three reasons: overcapacity in the steel industry,deteriorating financial conditions of enterprises,and the failure of implicit government guarantees.In addition,bond rating agencies,underwriters,and regulators,as important financial intermediaries in the bond market,have not effectively fulfilled their responsibilities to reduce information asymmetry in the market,accelerating the occurrence of bond defaults.Investors,out of blind worship of state-owned enterprises,lack a sense of rational risk prevention.Secondly,in terms of countermeasures for the default of state-owned enterprise bonds,the case of Northeast Special Steel Group gives a good example.In the choice of strategic investors,the stateowned enterprises and private enterprises are treated equally,and finally the private enterprises with more advanced market management experience are selected to inject new vitality into the group.It shows that local governments have begun to seriously try to use market-oriented methods to solve the default of state-owned enterprise bonds.This reorganization also provided various ideas for the debt and debt risk treatment of other state-owned enterprises.Thirdly,in order to break the implicit guarantee belief in an orderly manner and promote the rational allocation of resources,the behaviors of all stakeholders are crucial.Finally,this article gives suggestions from the three levels of government,bond issuers and financial intermediaries,hoping to promote the orderly transformation of China's credit bond market.