China

Chinese property developers kicked off the new year with a strong pipeline of bond issuance, in particular for long-tenor notes, taking advantage of easier regulatory approvals and robust market demand, Reuters reported. Analysts said there were signs of a slight loosening in granting quotas to developers with offshore refinancing needs, but cautioned that credit risks remained with property sales expected to be flat this year.

Hundreds of Chinese tech start-ups — including several unicorns — failed in 2019, with many more limping into the new year, as companies burned through cash in the face of growing financial headwinds, the Financial Times reported. According to new data from business information provider ITjuzi, 336 start-ups in the country were forced to cease operations over the course of last year, having collectively raised Rmb17.4bn ($2.5bn) from investors. Among them were companies valued individually at more than $1bn.

In a bond market where investors once received ham as interest payment, the challenge to rein in unruly borrowers is imaginably tough, Bloomberg News reported. That’s the daunting task Beijing faces now. In response to a surge in bond failures, Chinese regulators have taken unprecedented steps in recent weeks to restore investor confidence via more efficient and transparent handling of defaults.

A listed Chinese coal conglomerate that defaulted on bonds worth about $2 billion could file for bankruptcy under a restructuring plan proposed by creditors, a document seen by Reuters shows, as record bond defaults push China to improve risk management, Reuters reported. Beijing-based Wintime Energy Co Ltd, saddled with debt worth more than $10 billion, would use a combination of asset disposals, debt-for-equity swaps and extended deadlines to improve its debt structure and ease liquidity stress, according to the plan. The company and a creditor source confirmed the proposal as genuine.

Chinese solar developer Panda Green’s race to meet a January 25 deadline to honor US$350 million of senior notes appears set to go down to the wire after the deadline for accepting a delayed payment was extended, pv magazine reported. The heavily-indebted, Hong Kong-listed solar project developer has proposed postponing settlement of the 8.25% interest-bearing notes for two years, with 8% interest paid over the extension period.

Chinese companies are facing a reality check after years of ramping up debt. A de-leveraging campaign that President Xi Jinping began in 2016 to curb risks in financial markets has led to a crackdown on unregulated lending -- so-called shadow banking -- and tighter rules on asset management, Bloomberg News reported. That made it harder for some to raise funds to repay existing debt, leading to a record number of bond defaults in 2018 and 2019 as economic growth slowed. Contrary to what many investors thought, state-owned borrowers can’t count on a bailout.

China's central bank said on Wednesday it was cutting the amount of cash that all banks must hold as reserves, releasing around 800 billion yuan ($114.91 billion) in funds to shore up the slowing economy, the International New York Times reported on a Reuters story. The People's Bank of China (PBOC) said on its website it will cut banks' reserve requirement ratio (RRR) by 50 basis points, effective Jan. 6. The move would bring the level for big banks down to 12.5%.

China state-owned Qinghai Salt Lake Potash Co, the country's largest potash producer, failed to sell its assets in a fifth round of auctions on Wednesday aimed at raising funds and avoid being delisted from the Shenzhen Stock Exchange, the International New York Times reported on a Reuters story. The debt-laden company filed for bankruptcy with the Qinghai province court in September and halted trading in its shares in November. After posting net losses in 2017 and 2018, it has said it would be delisted if it reported a net loss for third successive year.

It was a bumpy year for China’s markets, considering all the turbulence in relations with the U.S. Still, the final results really aren’t bad, Bloomberg News reported. The Shanghai Composite Index closed off its best year since 2014, boosted by a huge rally in the first few months, when the country’s major equity benchmarks entered a bull market. While the yuan was whipsawed at times by every twist and turn in the trade dispute, it’s only weakened about 1.3% the past 12 months. Sovereign bonds rose, but lagged bigger gains in government-bond markets elsewhere.

Local governments in China are selling debt to raise cash earlier than ever to help shore up a slowing economy, Bloomberg News reported. Authorities in Sichuan and Henan provinces offered a combined 87.6 billion yuan ($12.6 billion) of so-called special bonds on Thursday in the earliest such issuance since nationwide sales began in 2015. Through 2018, sales began in March after the legislature formally approved the annual budget. But China has for a second year ordered local governments to move the timetable forward to speed up spending in areas like transport and energy infrastructure.