China's Practices Drive Investors To Exit

For Dhiraj Bajaj, the sudden twists and turns were unlike anything he had ever experienced in his two-decade investing career.

Creditors received warnings that Dalian Wanda Group was, in reality, $200 million short. I Photo: 瑞丽江的河水 Wikimedia Commons

First, Dalian Wanda Group Co. assured bondholders, including Bajaj, that everything was in order. They promised to pay the $400 million they owed in full. Wei Zhou and Pearl Liu reported for Bloomberg News.

However, just days later, some creditors received warnings that the company was, in reality, $200 million short. This shocking revelation triggered a frantic sell-off in the debt.

Then, almost as swiftly, lenders were informed that there was indeed enough cash, causing the bonds to surge once more. Ultimately, Wanda managed to make the July debt payment.

Nevertheless, Bajaj, who serves as the head of Asian fixed income at Lombard Odier (Singapore) Ltd., now expresses caution about investing in China.

This narrative has become increasingly common within the financial community.

As numerous debt-laden property companies, including industry giant Country Garden Holdings Co., grapple with avoiding defaults, international money managers are voicing concerns about the weak—and, many argue, deteriorating—governance and disclosure practices in China.

Experts warn that this trend could lead to reduced access to financing and higher borrowing costs for years to come, further hindering China's already struggling economy.

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