312m bond defaults in China

Chinese corporate bond worth $45 million sold through an Alibaba backed online wealth management platform defaulted after a bank said letters of guarantee for the bonds were counterfeit.

 

China Guanfga Bank Co Ltd (CGB) (GDDVB.UL) said guarantee documents, official seal and personal seals presented by the insurer of bonds are all fake.

 

This challenges China’s leniently regulated online finance industry, as retail investors often but high-yeilding bonds expecting them to be small risk and covered by guarantees provided by various insurers.

The 312 million Yuan worth high yielding bonds issued by Chinese phone maker Cosun Group defaulted.

The bonds sold through Zhao Cai Bao, an online platform run by Ant Financial Services Group, the payment affiliate of e-commerce firm Alibaba Group Holding Ltd.

Ant Financial has asked Zheshang property and Casualty Insurance Co Ltd which wrote insurance on bonds., to repay investors.

Ant Financial said Zheshang Insurance should not have any reason to refuse repayment to investors which it is obliged to do ”within three days” of default.