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NUS unit flags 16 China firms with high bond default risks

Published Wed, Mar 12, 2014 · 10:00 PM
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[SINGAPORE] Sixteen Chinese companies face a high chance of having their bonds default over the next year, given a lack of cash and problems of overcapacity in their industry, data from National University of Singapore's Risk Management Institute (RMI) showed.

The attention to Chinese corporate debt - which stands at 70 trillion yuan (S$14.4 trillion), or 120 per cent of China's gross domestic product - comes as Shanghai Chaori Solar Energy Science & Technology became the first Chinese company to default on payment for its onshore bond last week. The solar panel maker said that it would not be able to make coupon payment of 89.8 million yuan that had been due on March 7. It could pay just four million yuan.

"A significant portion of the debt has been used to expand capacity in a number of industries linked to the domestic real estate boom, or that were assigned importance by the Chinese government in response to the global financial crisis," said analyst James Weston in a weekly credit report issued by RMI. "As a result, industries including the solar, steel, cement and shipbuilding sectors are now plagued by overcapacity," he added.

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