Bond traders China received the good trade credit-default swaps - a signal indicating that the authorities are preparing for the fact that corporate insolvencies will be even greater - for AMarkets materials.
Credit default swaps allow investors to hedge against default of the issuer of a single paper. Earlier, the Chinese government allowed this month for the first time in the history of the State Corporation Guangxi Nonferrous Metals Group to start the bankruptcy process. This is a special moment. Never before has the power of state-owned companies were not allowed to go bankrupt this magnitude - always saved. All past legalized bankruptcy included only one small bank with debtors in the private sector. In the current situation, of industrial companies 108 creditors, including the public sector.
Analysts therefore write that Beijing will soon frustrate m asci with most half-dead, half-dead industry "zombies" that without state financial arm not make ends meet.
Credit default swaps can help investors mitigate risk and losses from defaults, that can happen. The Government would like to express their willingness to give "zombies come out of the dungeon, and die for all to see."