China’s onshore bond defaults likely to continue rising as ratio matches 2018 record, Fitch says
- Default rate by issuer count stood at 44 or 1.03 per cent in the first three quarters of this year, Fitch says
- Chinese companies have missed repayment obligations on onshore bonds worth more than 100 billion yuan (US$14 billion), says Goldman Sachs
China’s onshore credit market stress is showing no sign of abating after record defaults in 2018, as Beijing’s monetary policy easing fails to shore up debt-ridden private companies amid the slowest economic growth.
Default rate by issuer count stood at 44 or 1.03 per cent of all issuers in the first three quarters of this year, according to Fitch Ratings. That has already matched the ratio in all of last year, which was a historical high. Private firms made up 89 per cent of the defaulters, versus 87 per cent in 2018, Fitch said.
The cash crunch has also produced a rare failure by a state-owned enterprise in September, Goldman Sachs said in a report this week.
“Defaults are likely to continue rising, as many medium- and small-sized private firms are facing significant refinancing pressures,” Zhang Shuncheng, associate director of corporate research at Fitch, said in an interview. “Private companies suffer from many problems in their own operations, not to mention the impact from the slowing economy and tight credit environment.”