China securities regulator warns of further bond default risks

BEIJING/SHANGHAI (Reuters) - China's securities regulator said on Friday that exchanges should pay close attention to risks following a recent spate of corporate defaults, and as private companies face growing refinancing risks.

The China Securities Regulatory Commission (CSRC) "has noticed there have been relatively many bond default cases in securities markets, and has already reminded exchanges to pay close attention to risks," CSRC spokesperson Gao Li said at the the regulator's weekly news briefing.

Exchanges should conduct monitoring and research due to the potential for further bond defaults, she said.

Ratings agency Fitch on Thursday warned that a recent rise in corporate bond defaults and credit events would likely continue amid tight credit conditions.

The government is in the third year of a regulatory crackdown on riskier lending practices, which has slowly pushed up borrowing costs and is pinching off alternative, murkier funding sources for companies such as shadow banking.

So far this year, 10 issuers have defaulted on principal or interest payments on 17 bonds worth a total of 14.6 billion yuan this year, Fitch said. In all of 2017, there were 18 defaults involving 39.3 billion yuan.

The wave of defaults has been accompanied by an increase in the premium investors demand for holding riskier debt.

The spread between 5-year Chinese government bonds and AA-rated 5-year corporate bonds was at 211 basis points on Friday, an increase of nearly 48 basis points over the previous six months.

($1 = 6.3767 Chinese yuan)

(Reporting by Xiaochong Zhang in BEIJING and Andrew Galbraith in SHANGHAI; Editing by Kim Coghill)