Chinese corporate debt is seeing a record year in terms of defaults, according to data compiled by Bloomberg, with this year’s number of missed payments quickly approaching the previous high with a challenging H2 still to come.
Defaults in 2018 have so far come to about RMB 16.5 billion ($2.5 billion) – around three-quarters of the standing record set in 2016 of RMB 20.7 billion – on at least 20 domestic bonds.
With a pessimistic outlook for the next six months after signs of an economic slowdown ahead, confidence in Chinese companies’ ability to repay outstanding debts is being shaken. Chinese ratings agency Dagong has accelerated its downgrading of mainland firms.
The rising yields brought on by Beijing’s crackdown on debt financing in the economy will only intensify the problem companies face, which have traditionally struggled to find quality credit next to the more favoured state-owned enterprises.