Opinion | S&P warns China’s corporate credit levels expected to climb

China’s corporate credit levels are expected to rise this year, as its economy continues to slow, according to a latest report from S&P Global Ratings.

The country already has the highest corporate leverage of any industrial nation, with an average debt-to-GDP ratio of about 160 per cent.

But Christopher Lee, a credit analyst at S&P, is now warning that China’s credit quality is “deteriorating more quickly than at any time since 2009”, with S&P’s negative rating actions exceeding the positive rating actions by 3:1 in the first half of 2016.

The report expects Chinese corporates to “come under increasing strain as economic growth slows, industrial overcapacity crimps profitability and cash flow, and an elevated appetite for expansion weakens leverage”.

According to the S&P study, just one firm, China Fishery Group, a unit of Hong Kong’s Pacific Andes International which is Singapore-listed, defaulted in the first six months.

The company, which S&P described as a repeat defaulter, filed for chapter 11 protection in US Bankruptcy Court in New York along with more than 15 affiliates last month.