China’s debt-cutting efforts are sinking private companies, while debt-ridden state firms float on
Of the seven companies that experienced their first bond default this year, six were privately owned, ratings agency says
Beijing should focus its debt-reduction efforts on state-owned firms and local governments, but the biggest loser to date of the deleveraging process has been the private sector, a Chinese ratings agency said on Tuesday.
In the first five months of the year, 13 companies defaulted on about 20 bonds worth a combined 14.8 billion yuan (US$2.3 billion). Both the number of defaults and their combined value were significantly higher then the corresponding figures for the same period of last year.
Of the seven companies that experienced their first (onshore) bond default in the period, six were privately owned, according to Zhou Hao, president of China Chengxin International Credit Rating Co, a joint venture with Moody’s.
A growing number of private firms could face cash flow problems in the second half of the year as they are the most vulnerable to the government’s crackdown on shadow banking, he told a conference in Beijing.
“It is the private firms that are mainly affected in this round of the deleveraging campaign.”
