The looming debt default of Shanghai Chaori Solar Energy Science and Technology Co. Ltd. will not expand into a major credit risk on the mainland, Tom Wu, senior executive vice president of Franklin Templeton Investments said Thursday.
“This is not a small problem, but I believe that the government is able to deal with it, although we can already see that there is less liquidity in the market,” Wu said.
Chaori Solar will not be able to repay 89.8 million yuan (US$14.61 million) in interest due on March 7 on one billion yuan of corporate bonds issued in 2012.
But Wu is worried that the liquidity in the mainland market will be tighter in the short term due to the large number of initial public offerings.
He also said that although the valuation of most mainland banks is low due to bad debt concerns, the financial industry is a good investment choice in the long run as it is set to benefit from the country’s economic growth.
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