Chinese corporate bond defaults to surge to a record high in 2020 as government rescue is no longer guaranteed, says Fitch
- The number of new onshore issuers who fail to repay debt could rise to up to 60 next year from 51 in the first 11 months this year, according to Fitch
Corporate bond defaults in China will reach a record high next year, with Beijing unlikely to come to the rescue of struggling companies, according to Fitch Ratings.
The number of new onshore issuers who fail to repay debt could rise to up to 60 next year from 51 in the first 11 months this year, with the default rate jumping to 1.3 per cent, the ratings agency said. Moody’s, however, said last month that it expects new issuers who fail to meet repayment obligations to rise to as many as 50 next year.
“We see 60 per cent of companies with debt due in the next 12 months do not have enough cash to repay their debt,” said Jenny Huang, director of China corporate research at Fitch. “Banks may cut some slack and extend the repayment date of loans to private companies, but will not save them from offering new financing to pay their debt.”
Hohhot Economic & Technological Development Zone Investment Development Group, a local government financing vehicle from the Inner Mongolia autonomous region, overshot a December 6 deadline to service its bond. Local media reported that the company repaid 565 million yuan (US$80.2 million) of principal and 68 million yuan interest on its 1 billion yuan note on Monday.