China

Chinese corporate bond defaults will likely continue to rise next year due to daunting refinancing costs, with defaults expected to concentrate on the country’s cash-starved private sector, Fitch Ratings said on Wednesday, Reuters reported. Availability of credit for firms to refinance their borrowings remains tight despite the central bank’s monetary policy easing steps, as commercial banks continue to be cautious in lending to private companies and non-strategic, financially wobbly state-owned enterprises (SOEs), Fitch said.

Chinese conglomerate HNA Group has put up for sale property assets worth at least $11 billion, according to documents seen by Reuters, accelerating a push to cut its large debt and restructure, the International New York Times reported on a Reuters story. Two sets of documents reviewed by Reuters listed more than 80 assets that HNA has either put up for sale or intends to sell, including hotels, commercial and residential buildings. They are mostly within China, with the bulk of them located in Hainan Island, where HNA is headquartered.

Xinjiang Production Construction 6th Shi State-owned Assets Management is an agricultural trader and producer that traces its history to Chairman Mao’s efforts to develop China’s far-flung frontiers. It is also emblematic of the difficulties facing the country’s debt-ridden local government financing vehicles (LGFVs) as China’s central authorities attempt to convince investors that the bonds can default, according to HSBC, Bloomberg News reported. The company missed payment on a yuan-denominated issue in August, only to fully repay two days later.

Chinese internet giant Tencent Holdings announced on Sunday its first restructuring in six years, done at a time it faces increased challenges from tighter government regulations, the International New York Times reported on a Reuters story. The reshuffle comes as Tencent Holdings, which has seen a hefty fall in market value this year, is facing fresh criticism from analysts and investors unnerved by regulatory roadblocks, a fuzzy overseas strategy and growing debt.

Two years after China’s top banking regulator pushed for market-based workouts for defaulted bonds, local authorities are still putting a heavy hand on negotiations, a review of recent episodes shows. The evidence from several of the record number of defaults this year suggests local officials are moving to keep troubled business from failures that could unleash waves of job losses and the attendant social and economic damage, Bloomberg News reported.

Chinese non-financial corporate debt is rising again as a percentage of gross domestic product following a year and a half of deleveraging from its mid-2016 record, according to new data from the Bank for International Settlements, Bloomberg News reported. The ratio jumped to 164.1 percent in the first quarter of 2018 from 160.3 percent in the final three months of 2017, erasing more than half of the progress Chinese companies had made in reducing debt loads since the ratio topped out at 166.9 percent in the second quarter of 2016, the BIS data, published September 23, show.

Chinese local governments are flooding the debt market with a new type of bond, lining up $200bn in issuance designed to fund infrastructure investment as Beijing seeks to stimulate a slowing economy, the Financial Times reported. China’s parliament in March approved a quota of Rmb1.35tn ($197bn) for issuance of “special-purpose” bonds for 2018, more than the combined quotas for the previous two years. But until recently, actual issuance was sluggish as local governments were under pressure to cut borrowing.

When Chinese businessman Yuan Yafei met British Prime Minister Theresa May in Shanghai this February, he vowed to keep pushing for further economic collaboration between China and the U.K., where his Sanpower Group owned the 169-year-old department-store chain, House of Fraser. But only six weeks later, Yuan’s group was pulling back from the U.K., beginning a months-long bid to sell the retailer that had been battered by online rivals, a weakening pound and mounting costs, Bloomberg News reported.

China’s HNA Group is in talks with banks to find a buyer for its CWT logistics firm just nine months after acquiring the Singaporean company in a $1 billion deal, six people familiar with the matter told Reuters. The sale, if completed, would be the latest in a series of divestments aimed at slashing debt at the aviation-to-financial services conglomerate that is restructuring its far-flung operations, Reuters reported.

More than 30 highly-leveraged Chinese state-owned enterprises (SOEs) have drawn up new plans to cut debt, the official China Securities Journal reported on Wednesday, part of a plan to cut debt ratios in the state sector by 2 percentage points by 2020, Reuters reported. China is in the middle of an ambitious corporate restructuring programme aimed at reducing debts and improving the performance of its huge but lumbering state-owned sector.