China’s private firms defaulted at record rate, Latest Business News - The New Paper

China’s private firms defaulted at record rate

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SHANGHAI : China's private companies have defaulted at a record rate this year and could face similar pressures in 2020, rating agency Fitch said yesterday.

A record high of 4.9 per cent of China's privately-owned issuers defaulted on onshore bond payments in the first 11 months of 2019, up from 0.6 per cent in 2014.

Privately-owned enterprises (POEs) accounted for more than 80 per cent of bond defaults.

Ms Jenny Huang, director of China corporate research at Fitch, said at a briefing that she expects the POE default rate "to stay at around this record level in 2020".

China's mounting defaults reflect the struggles of private firms as a slowing economy and high refinancing pressures make it harder for companies to repay debts and take out new loans.

Weaker issuers will face difficult conditions due to Beijing's "selective" efforts to support only more-qualified small and private firms.

Ms Wang Ying, head of APAC energy and utilities at Fitch, said that although general market liquidity conditions were relatively loose this year thanks to central bank support, banks remained cautious toward some private firms.

"Many private sector companies, the majority of those who are listed on the A-share markets, basically can't repay their debt with the cash flow from operations. So they all need to refinance," she said. - REUTERS