A new report from a government-backed think tank shows that since Beijing launched its nationwide deleveraging efforts towards the end of last year debt ratios in private industry have actually increased, Caixin reports.
The report, published by the Centre for National Balance Sheet at the National Institution for Finance and Development, said that the unexpected result was a form of “passive leverage building process as a result of a deteriorating financing environment and the squeeze by state-owned enterprises (SOEs).”
Whilst debt ratios for the highly-leveraged state sector have fallen since the end of 2017, the figure for private industrial firms reached 55.8% as of the end of June, from 51.6% in December.
Higher financing costs and “an erosion in profitability due to a government campaign to curb overcapacity which has boosted commodity prices,” were presented as the two leading causes of the higher debt levels.
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