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Risks in the domestic bond market can be controlled, and occasional defaults won't affect its overall steady condition or reduce demand for financing and investment, the China Securities Regulatory Commission said on Friday.

The steady growth of the economy and financial system is good for the development of the bond market, and the nation's economic transformation is favorable for financing and investment activities, said Zhang Xiaojun, a spokesman of the CSRC.

"Compared with developed countries, our debt ratio is not high and the risks are controllable," said Zhang.

"Some companies may face the possibility of default amid tighter liquidity, higher funding costs and changes in the industry cycle," said Zhang.

"But default in bond markets is a normal outcome of market forces, and we should regard it in an objective and rational way."

The commission made the statement in response to the failure of Shanghai Chaori Solar Energy Science & Technology Co to make a bond interest payment a week earlier.

That was the first default in China's corporate bond market.

Zhang said the commission will push the parties involved in bond issues to follow laws, regulations and debt covenants.

"The commission will work well in building the system, including strengthening information disclosure and investor education," Zhang said.

More investigation of illegal activities and monitoring to guard against systemic risks are the commission's other major tasks, he said.

Deng Haiqing, a senior bond analyst at Citic Securities Co Ltd, said that the default is a milestone in the Chinese bond market and the market welcomes it.

"Compared with other mature bond markets, there's no risk pricing in China, and the default event can make market participants more sensitive to the risks and prices of debt products, which is good for the healthy development of the Chinese bond market in the long-term," said Deng.

Deng said that private-sector companies and those with excess production capacity may encounter more difficulties in financing and their borrowing costs will increase.

Daimler breaks ground with yuan debt

Daimler AG on Friday became the first foreign nonfinancial company to issue yuan-denominated bonds in China.

Daimler issued 500 million yuan ($81 million) one-year bonds, tapping into an additional source of financing in the Chinese capital market.

The issue "signifies that the Chinese bond market has formally established a financing channel for nonfinancial companies overseas", said a statement from sole underwriter Bank of China Ltd.

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