China's Chaori in bond default

As expected, Tier 2 Chinese PV manufacturer Chaori Solar today confirmed that it has defaulted on its domestic corporate bonds, becoming the first Chinese company to do so.

Executives at Chaori admitted yesterday that the company was only in a position to pay out 4m yuan ($650,000) of the 89.9m yuan that it owed its bondholders as of today.

“We will try our best to pay bondholders as soon as possible, but the company also has other debts,” an executive was quoted as saying the Wall Street Journal.

Chaori’s default is seen as a watershed for China’s economy, where untold numbers of companies – not least in the solar sector – have been granted bailouts and extensions on their loans in recent years.

Beijing is making an example of Chaori, according to analysts, as it looks to tamp down the froth that has built up across the Chinese economy.

A number of China-based PV manufacturers have defaulted on overseas bonds, most notably Suntech.