China’s economy is slowing, profits are falling and its stock market is drifting down, but its corporate bond market is moving in the exact opposite direction: it is booming.
Bond issuance was up about 60 per cent by volume in the first half from a year earlier. By comparison, virtually all other forms of financing were sluggish. Equity issuance fell, new bank loans were barely up and off balance-sheet lending contracted.
The fact that corporate bonds have bucked this trend is an important and positive development. It indicates that China is gradually making the transition to a direct financing model, reducing an over-reliance on bank credit that officials and analysts see as one of the major dangers for the economy.
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