Cracks in China’s onshore credit market to widen on tighter leverage, slowdown risks
- Bonds with a total face value of 99 billion yuan became overdue in the first half, a 35 per cent jump from a year earlier: Wind Information
- Banking sources say lenders are trying to avoid writing new unsecured loans to indebted developers following official guidance
While the number of companies dropped from 19 a year earlier, the amount has surged, according to data compiled by Wind Information. Bonds with a total face value of 99 billion yuan became overdue in the January to June period, representing a 35 per cent jump.
China’s efforts to rein in the red-hot property market could intensify the problem in the coming months, analysts said. Following the “three red lines” guidance on corporate leverage last August, highly indebted developers continue to attract scrutiny as the nation’s economic rebound falters.
“We expect the number of defaults to jump in the next few months,” said Wang Feng, chairman of Shanghai-based financial services group Ye Lang Capital. “Real estate companies and some debt-ridden local state-owned enterprises (SOEs) are grappling with difficulties in managing their cash flows and are being closely watched.”
China’s gross domestic product probably grew by 8 per cent in the second quarter, according to the median estimate of forecasts tracked by Bloomberg, versus 18.3 per cent in the preceding quarter. The central bank will unleash more than 1 trillion yuan to ease a potential liquidity crunch from July 15, the same day the GDP report is due.