(China Alert) Chinese CDS: The default option

-China’s credit markets are set to introduce more diversified risk management tools
-This is a necessary function of a maturing bond market
-Provisions for foreign managers should soon be clarified

Update: A new set of tools to manage credit risk is being launched in China: today the National Association of Financial Market Institutional Investors (NAFMII) revised the credit risk mitigation (CRM) market and will introduce credit-default swaps (CDS) and credit linked notes (CLN). This comes hot on the heels of the increase of defaults in China. Prior to 2016, there were a total of 26 official cases of bond default on the Mainland. This year there have been 44. The launch of CDS and other tools could redefine China’s bond market, accelerating its convergence with global standards.

Convergence is one thing, but it’s more than that: …

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