China heavy machine maker Erzhong bond payment default looms as growth slows

A unit of China's biggest state-owned machinery company may be unable to make interest payments on a bond, it said, as slowing growth heightens default risks among heavily indebted firms.

China National Erzhong Group (CNEG), which makes metal smelting equipment, may miss an interest payment on a one billion yuan five-year bond issued in 2012, it said in a statement late on Tuesday, without giving an amount.

Mainland authorities say they are trying to reform the lumbering, inefficient industrial giants of the state sector, but the process is slow and obstructed by vested interests.

CNEG is a subsidiary of China National Machinery Industry Corporation, China's biggest state-owned machinery company and one of about 110 major state-owned firms under the direct central government management.

Investors have asked a court in the southwestern province of Sichuan, where CNEG is based, to restructure the firm as it "clearly lacks the ability to pay", the statement said, adding the interest payment was due on September 26.

China has already seen bond defaults this year as slowing growth in the world's second-largest economy pressures companies.