I was in Hong Kong a couple of weeks ago to find out more about the Chinese corporate bond market. To start with it’s huge, and growing rapidly. But it comes with some well-known challenges – the large weighting towards property debt, the lack of information about issuers (ratings tend to be done only by the domestic ratings agency), and perhaps most worryingly the issue of structural subordination. Many investors in Chinese debt have found that what they believed to be a senior claim on the assets of a Chinese company turned out to rank below equity when things turned back. Overseas investors in China have a poor record of getting recovery values when things go wrong. This short video takes a look at a few of these issues, and additionally discusses shadow banking and Dim Sum bonds.