The domestic downgrade of Chinese corporate bonds has more than tripled this year, highlighting Beijing’s efforts to mitigate risk in the country’s $ 17 trillion credit market as a result of some notable defaults. ..
International rating agencies and fund managers have long criticized China Artificially expensive A company’s credit rating and low default rate indicate a lack of transparency and the assumption that the government will bail out struggling companies.
However, according to data from information provider Wind, 366 bonds were downgraded in the first four months of 2021, compared to 109 bonds in the year-ago quarter.
The increase warned that Beijing would be “zero-tolerant” against corporate misconduct after China’s Deputy Prime Minister Liu He warned in November. A set of defaults Depends on state-owned enterprises.
According to analysts, regulators are putting pressure on debt underwriters, domestic rating agencies and auditors to facilitate more timely disclosure of risk.
Among the hundreds of downgrades this year were bonds issued by HNA, a previously acquired conglomerate that has been addressing debt and liquidity issues for almost five years. Tsinghua UnigroupAn important computer chip investor who has been facing questions about bond repayment since 2018.
Charles Chan, a leader in Greater China in Hong Kong’s S & P global rating, said inadequate risk disclosure by Chinese companies is “beginning to improve.”
“If the promotion of that regulation is working, there should be an increase in timely behavior that indicates the underlying distress .. It does not mean that there is an increase in distress, but simply that distress. It means that the signs of are increasing, “Chan said.
S & P said more than 80% of local ratings for non-financial corporate issuers in China are classified as Double A. Below that grade, the Chinese group will not be able to issue listed debt.
The five domestic rating and auditing companies contacted by the Financial Times did not respond to requests for comment.
Chinese regulators have been struggling for years to improve the transparency of the country’s corporate bond market. Increased regulatory oversight has become more serious for debt-bearing state-owned enterprises, analysts said.
The focus has sharpened since the state-sponsored default of Nagashiro coal and electricity bonds in November. I sent a shock wave Through China’s financial system.
Despite China’s return to pre-pandemic economic growth in the fourth quarter of 2020, some of the defaults may have been due to the economic damage caused by the coronavirus pandemic, analysts said.
Xiaoxi Zhang, an analyst at Gavekal Dragonomics, said Chinese leaders have picked “hidden debt” as a priority this year to change the market’s perception that many companies are implementing “implicit guarantees.” He said he was working on. The state will bail them out..
“The government wants to take advantage of the strong growth momentum of the post-covid rebound to address structural issues,” she wrote in her research notes.
“But that’s also because current credit tightening and the withdrawal of supportive economic policies can cause broader fiscal stress if hidden debt isn’t dealt with well.”
However, S & P Chang pointed out that China’s default rate remains relatively low. “China’s default rate needs to be doubled or tripled to reach the levels found in the United States, Europe, and emerging markets,” he said.
Additional report by Sherry Fay Ju in Beijing
Corporate bond downgrades by China rating agencies triple Source link Corporate bond downgrades by China rating agencies triple