The National Development and Reform Commission (NDRC) and the State-owned Assets Supervision and Administration Commission (SASAC) have, in a rare intervention in the bond market, pre-empted a potential default by Sinosteel. This is the first time state regulators have intervened in a corporate credit case. In the five previous cases in the country this year, the companies were bailed out by shareholders. “You can’t get to a liberal and open market where nobody fails,” said Jini Lee, a partner at law firm Ashurst. “There has got to be some controlled defaults along the way if it is to transform into a market-driven economy.” Lee previously advised the Ministry of Finance on its first offshore listed bond issue. Sinosteel debt holders were first asked not to redeem the bonds and then told the redemption date would be delayed by a month to November 16. Sinosteel’s debt-equity ratio has been hovering above 90% in recent years. More corporate bond defaults might become the norm as the slowdown deepened, Nomura China Chief Economist Yang Zhao warned. Company issues make up only 4.3% of the country’s CNY35 trillion bond market. Most of the bonds in the country – 70% issued by the government and policy banks – are still held to maturity. Cases like Sinosteel’s will start to test the robustness of the nation’s bankruptcy laws, information disclosures and the soundness of its credit rating system, the South China Morning Post reports.