BEIJING - The default on private bonds issued by Xuzhou Zhongsen will be handled in accordance with market rules, China Securities Regulatory Commission (CSRC) said on Friday.

In a post on its Weibo microblog, the CSRC said it has required the bond issuer, broker and insurer to fulfill their responsibilities to investors.

Xuzhou Zhongsen Tonghao New Board Company in East China's Jiangsu province, which manufactures construction materials, has missed an interest payment of some 18 million yuan ($2.9 million) on its 180 million yuan privately-placed bonds, according to media reports, the second default by a Chinese company in less than a month.

Last month, solar cell manufacturer Shanghai Chaori Solar Energy Science and Technology Co failed to pay the full 89.8 million yuan interest due March 7, the first default of a publicly-traded bond in China's onshore market since 1997.

The CSRC said Xuzhou Zhongsen, which is operating normally, failed to pay its bond interest because of a liquidity problem.

According to the CSRC, Hualong Securities, manager of the Xuzhou Zhongsen bond, had asked bond insurer Sino-capital Guaranty Trust Co Ltd to pay the interest on behalf of Xuzhou Zhongsen within 30 working days.

Rating agency Moody's said the Xuzhou Zhongsen default would not reduce the ability of rated Chinese mainland non-financial companies to obtain funding.

Most of the Chinese mainland companies rated by Moody's will maintain access to multiple funding sources and Moody's sees little effect from any tightening that may occur in the onshore bond market following the defaults, said Moody's analyst Hu Kai.

The latest default, however, highlights the challenges facing small and medium companies as economic growth has slowed and the government allows market forces to play a larger role in the economy, Hu said.

"The government and Sate-owned banks did not step in to bail out the defaulting companies, as they have done in the past."

The lack of intervention was consistent with the central government's adoption of more market-oriented policies, which include increased tolerance of bond defaults, as it reforms the country's financial markets, he said.

"We believe the defaults will cause lenders to look more closely at the credit quality of companies," Hu added.

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