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The Chinese bond market in 2019 could face the biggest defect in its history, with 13 trillion dollars. This is demonstrated by a Bloomberg study.
According to data collected by the agency, in the first four months of this year, Chinese companies have already defaulted on their national bonds amounting to 39.2 billion yuan (5.8 billion US dollars). It's about 3.4 times more than the same period in 2018, Bloomberg notes. In addition, according to him, the pace of development of this process is now three times higher than in 2016, when the risk of default was concentrated in the first half. The trend, says Bloomberg, is clear: if nothing changes, 2019 will present a new default maximum for the Chinese bond market.
The reason for this agency explains the reduction of finance companies. According to Bloomberg, China continues to pressure banks to provide loans to private companies (especially small and medium-sized enterprises). At the same time, the country's authorities, the agency recalled, focused on reducing the shadow banking system, where credit decisions were made with less control from the regulators. Thus, according to the authors of the study, the default wave started at the end of 2017 and continues to this day. In 2016, in their opinion, Chinese leaders tried to reduce excess production capacity, which ultimately affected the credit markets.
"Due to the short maturity of bonds, companies often have to refinance their liabilities," says a rating from Moody's Investors Service badysts. According to experts, companies that can not do this are likely to face difficulties. "Banks are reluctant to lend to such companies," say the experts, noting that these organizations rely mainly on "shell banks." The number of these continues to decline due to the fact that their regulation reduces power.
According to Bloomberg, among private companies that failed to repay most bonds this year, Neoglory Holding Group (the main conglomerate company), the manufacturer of the wire is Shandong SNTON Group, China Minsheng Investment Group Corp. , the Citic Guoan Group Co. and Goocoo Investment Co.
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