INSUBCONTINENT EXCLUSIVE:
China is zooming to a record year of corporate-bond defaults, with the 2018 total already more than three-quarters of the previous high even
before an expected economic slowdown bites.
Chinese companies have reneged on about 16.5 billion yuan ($2.5 billion) of public bond payments
so far this year, compared with the high of 20.7 billion yuan seen in all of 2016, according to data compiled by Bloomberg
exclusively a local affair, with foreign investors gravitating toward government-linked securities since China boosted access to its bonds
The worsening in credit quality offers little incentive to dip in now, though in time analysts see a more disciplined credit market offering
diversification opportunities.
In the meantime, rising yields are set to make the refinancing of maturing debt all the tougher for private
companies that lack the access to the statedominated banking system that national behemoths enjoy
dropping.
Borrowers have missed payments on at least 20 domestic bonds so far this year, according to data compiled by Bloomberg
There was about 66.3 billion yuan of defaulted notes outstanding at the end of May, or 0.39 per cent of corporate bonds outstanding, PBOC
While still small, that share may be poised to rise.
Dagong has reported 13 credit-rating downgrades compared with 10 upgrades so far this
year, the highest such ratio on record, according to Bloomberg-compiled data
Results from Dagong peers such as China Chengxin International Credit Rating Co
and China Lianhe Credit Rating Co
show similar trends.
The silver lining is that the defaults show Chinese regulators are increasingly comfortable with allowing struggling
companies to fend for themselves without official rescues
Bond defaults are good for the longterm development of Chinese markets, Pan Gongsheng, director for State Administration of Foreign
shore up credit provision may rise
Data over the weekend showed that a gauge of export orders tumbled into contraction in June.
