The total number of Chinese onshore company bond defaults this year just equaled the record set for the whole of 2018.
New defaulted bonds reached 120 this week, according to data compiled by Bloomberg. The missed payments totaling 102.9b yuan ($14.6 billion) is approaching last year’s all-time high of 122 billion yuan. Some 45 companies have defaulted on their debt year-to-date versus 40 in the previous year, Bloomberg data show.
China’s economy grew by 6% in the third quarter, the slowest annual rate in 30 years. This was down from 6.4% in the first quarter and 6.2% in the second. The main culprits include sputtering factory output and sagging infrastructure investments, Gwynn Guilford reports with Quartz.
The Chinese government has long defied this economic logic. Since many of its investments aren’t profitable, the money to fund new economic activity comes instead via credit from state-run banks and, in the past, through shadow finance (loans made off bank balance sheets). It achieves this in part by controlling banks, though also through setting GDP targets that tell local government officials how much they must invest to earn promotions. (The 2019 target, by the way, is 6-6.5%, so it just barely made it last quarter.)
The ongoing trade tensions have led to an economic war in all but name. Washington slammed 28 Chinese tech companies with sanctions for their part in the repression of Uighur Muslims.
More than 40 Very Large Crude Carriers, or LCCs, operated by China’s Cosco Shipping Energy Transportation have been blacklisted for moving sanctioned Iranian oil, Aljazeera reported.
Chinese banks are bolstering their offshore loan recovery teams as they face a wave of bad debts linked to struggling overseas businesses.
The property bubble has become very serious in China. This year, over 370 real estate companies in China have closed their operations because of bankcruptcy.
China claims to have 3 trillion US dollars in foreign reserves. But by the end of the year, foreign debts amounted to one trillion need to be paid; another trillion from foreign trade and profits is not listed as foreign reserves; and 700 million has to be released for the Belt and Road projects. Thus China has actually used up all its foreign reserves.
Soon, there will be no money left for securing the huge expenses in maintaining social security. There is no doubt that the dictatorship is collapsing.
Edited by Winnie Troppie