Private borrowers bear the brunt of China’s soaring bond defaults as slowing economy and trade war put the squeeze on finances

China’s corporate borrowers, especially non-state companies, are missing a record number of bond payments, as business conditions worsened amid the slowest economic growth pace in three decades, while a year-long trade war with the US crimped the biggest market for many exporters.

Thirty private businesses missed their repayment obligations on 89 issues valued at a combined 60 billion yuan (US$8.7 billion) so far this year, an increase of 150 per cent from the same period in 2018, according to data by Shanghai Wind Information. That’s more than the state-owned enterprises that missed eight bonds valued at 10 billion yuan, and topping last year’s 126 defaults worth 11.4 billion yuan.

“The reality on the ground is that thousands of private companies are facing difficulties in sustaining their business growth this year, because of declining sales and narrower profit margins,” said Eric Han, a senior manager with business advisory firm Shanghai Suolei. “Business morale appears to be low among entrepreneurs who are reluctant to invest in business expansion.”

Defaults are likely to rise further, after China’s economy expanded 6.2 per cent in the three months ended June, the slowest quarterly pace since record-keeping began in 1992, analysts said.

The US-China trade war continues to weigh on entrepreneurs although the two countries agreed to resume economic and trade talks in June.