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Caixin

The wild west of China's bond market that regulators want to tame

Opaque valuations, inflated ratings and masked risks leave investors vulnerable

China's primary junk bond market is essentially made up of inflated "structured issuances," a creative but shady way for some Chinese companies with high credit risks to raise funds.   © Reuters

In China's junk bond market, investors gamble when companies tumble. Some win big, while some lose big.

Some investors in junk bonds, often referred to by the rose-tinted industry term "high-yield bonds," have been earning a 20% annualized return, with some hoping to make 40%, an investment banker with a midsize brokerage said. "High-yield bonds have been in a bull market in the past two years."

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