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People walk at Lujiazui financial district of Pudong in Shanghai, March 5, 2014.
People walk at Lujiazui financial district of Pudong in Shanghai, March 5, 2014.
(Aly Song/Reuters)

China’s first bond default was long overdue

In the vast credit universe, a minor bond default by a middling solar-equipment company would normally pass unnoticed by everyone but the investors stuck holding the paper.

But the failure of Shanghai Chaori Solar Energy Science & Technology Co. to meet an interest payment due Friday on a one-billion-yuan ($163-million U.S.) bond issue was not your ordinary case of another cash-strapped borrower missing a deadline. It marked the first time since Beijing embraced its singular capital-markets vision that any Chinese corporation had defaulted on a debt obligation, sparking fears that many more “zombie” companies could soon be marching off the same cliff.