The Causes Of Chinese Credit Debt Default And Risk Warning

Since the reform and opening-up,Chinese credit bond market has developed quickly.Chinese bond market’s scale has ranked third in the world in 2020.It has become an indispensable part of Chinese and even the global financial system.However,recently,Chinese credit bond market default cases happened frequently.Moreover,since 2014,the“rigid cash” phenomenon of Chinese credit bond market has gradually been broken.The Guiding Opinion was issued in April 2018,which emphasized resolutely breaking the “rigid cash”.And in July 2020,the People’s Bank of China announced that the Guiding Opinion would be extended by one year,resulting in the gradual exposure of bond default risks,posing a huge threat to the healthy development of Chinese financial system.Based on the above background,this article summarizes the theoretical basis of credit debt default and risk warning,and analyzes the current status of default in Chinese credit bond market;This article deeply analyzes the background of Chuying Agrd-Pastoral Group,clarifies the context of its bond default incident,summarizes the specific reasons for the credit bonds default of Chuying Agrd-Pastoral Group Bonds from three aspects of macroeconomics,industry development and company management,and points out that the mistake of its development strategy is the main cause of the default;uses the Z-Score model and KMV model to assess the risk warning of the Chuying Agrd-Pastoral Group’s credit bonds default.Finally,from the perspectives of bond issuers,market regulators,and investors,gives suggestions to the risk prevention of Chinese credit bond market.This article uses case analysis,comparative analysis and a combination of qualitative and quantitative analysis,based on the case analysis of the credit bond default of Chuying Agrd-Pastoral Group,analyzes the causes of its default on credit bonds and constructs two risk warning models.This article mainly draws the following three conclusions: First,the default of credit bonds is affected by the macroeconomics,industry development,policies,corporate management level and other factors.Second,the main reasons for the default of Chuying Agrd-Pastoral Group is the company’s aggressive cross-border investment and the flaws in its business model.After the implementation of the “ Chuying 3.0” in 2016,Chuying AgrdPastoral Group guaranteed a large number of loans to its cooperatives,which resulted in the restriction of company assets,and the company aggressively built breeding farms and pig houses,but did not introduce enough pigs for matching,which eventually led to a shortage of cash flow of Chuying Agrd-Pastoral Group;at the same time,the company was frantically making cross-border investments,but all ended in failure.Although the macroeconomic downturn and the pig cycle have also had an important impact on the risk of default for Chuying Agrd-Pastoral Group,they are not the decisive factor.Third,both the two models can effectively identify the default risk of the Chuying Agrd-Pastoral Group,and provide a good risk warning method for subsequent bond-related research and investor risk identification.