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In depth: How ethylene glycol led to the Yongcheng Coal default

Unprofitable investments a decade ago ultimately dragged mining companies down

Chinese workers shovel coal onto a truck at a mine in Huating, Gansu Province.   © Reuters

The surprise default that threw China's corporate bond market into turmoil last month can be traced to massive, unprofitable investments a decade ago in ethylene glycol, a toxic but useful industrial chemical that Chinese factories consume in vast quantities.

The business case seemed sound in 2010 for the state-owned coal mining operations of central China's Henan Province to diversify into the product, which can use coal as a raw material. But the leader of Henan Energy and Chemical Industry Group who initiated the investments was later convicted of corruption and imprisoned.

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