According to a report on the’Recent China’s Bond Default Increase and Implications’ of the KDB Future Strategy Research Center on the 2nd, the default balance of Chinese companies’ bonds as of December 16 last year was about 433 billion members (about 72.7 trillion won), about 46 from the previous year. % Increased. The proportion of private enterprises was the largest at 62.7%. The proportion of local state-owned enterprises and central state-owned enterprises accounted for 16.5% and 12.4%, respectively.
In particular, the default of state-owned companies that were given the highest credit rating (AAA) occurred one after another, which raised anxiety. In November of last year, the central state-owned company Tsinghua Unigroup, the flagship of China’s “semiconductor rollout”, failed to repay maturity bonds following Yongqing Coal Electric Power, a local state-owned company.
In the aftermath, cases of canceling or postponing bond issuance have increased significantly. From November 10 to December 16 last year, when the default of junggong coal power took place, the amount of cancellation and postponement of issuance is estimated at 127.3 billion yuan. Of this, 90% is from state-owned enterprises.
In the end, the amount of net financing through the Chinese bond market was negative as of December 16 last year. The new issuance of corporate bonds is 3794 billion yuan less than the scale of maturity. This is the first time since 2013 that the scale of monthly net financing has been negative.
The report evaluated that the default for state-owned companies with good credit ratings was to expose the vulnerability of the Chinese bond rating system. In addition, it was interpreted as reflecting the government’s will to restructuring insolvent state-owned enterprises. It is not unconditionally protecting central state-owned enterprises with high strategic importance like Tsinghua Unigroup.
The report predicted that the default phenomenon of Chinese companies’ bonds will continue for some time due to weakness in the credit rating system. However, as the reform and opening up of the Chinese capital market is progressing, it is expected that it will gradually improve.
In January 2019, Global Credit Rating Company Standard & Poor’s was approved to establish a subsidiary in China and entered the renminbi bond credit rating market. In May of last year, Fitch was approved to establish a subsidiary.
The report said, “With the opening of the market to global credit rating agencies, China’s bond credit rating system will improve and foreign capital inflows will continue.” “The People’s Bank foreshadowed the strengthening of management and supervision.”
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