Difficulties and Optimization Paths of the Application of "Cross-default" Clause in Chinese Real Estate Corporate Bonds

Abstract

Since the second half of 2021, the collapse of the Chinese real estate market has resulted in a large number of bond defaults by real estate companies. Among many constraint clauses, the "cross-default" clause has caused considerable problems in triggering and enforcement due to its late introduction in China and the lack of guidance on its application. This paper analyzes the difficulties in the application of the real estate "cross-default" clause and proposes optimization paths based on the differences and similarities of regulations between domestic and foreign markets. This will help Chinese real estate companies to use the "cross-default" clause more effectively and protect the interests of bond issuers and holders. The paper adopts the method of legal regulation analysis and case analysis, focusing on the actual application of the "cross-default" clause in the Chinese market including unclear triggering conditions and a lack of effective enforcement methods. The paper proposes optimization plans including strengthening government supervision, improving laws and regulations, optimizing bond issuance mechanisms, and enhancing credit ratings of bond issuers. The significance of the research lies in providing practical recommendations and measures to improve the operation mechanism of the Chinese bond market, and to provide reference and guidance for Chinese real estate companies in risk management.