China

A Chinese company in a remote area near Tibet has had a dizzying month in the credit market, underscoring broader concerns about debt loads at local borrowers, Bloomberg News reported. Notes from Qinghai Provincial Investment Group Co. due later this year surged by a record on Wednesday after Bloomberg News reported that the firm plans to repay the securities. The bonds had tumbled to record lows just last week after S&P Global Ratings said the company’s short-term debt totals more than six times cash and that it lacks a plan to refinance the notes.

China’s top economic planning body has told the country’s heavily indebted property companies to curb their issuance of dollar-denominated bonds, a sign of Beijing’s concern about the side effects of the yuan’s recent slide, The Wall Street Journal reported. In a statement late Wednesday, the National Development and Reform Commission said it would ban property companies from selling bonds outside China, unless the proceeds were used to repay maturing debt or to prevent defaults.

A leaked report from a Chinese government-backed think tank has warned of a potential “financial panic” in the world’s second-largest economy, a sign that some members of the nation’s policy elite are growing concerned as market turbulence and trade tensions increase, Bloomberg News reported. Bond defaults, liquidity shortages and the recent plunge in financial markets pose particular dangers at a time of rising U.S.

China’s domestic bonds, denominated in renminbi, have been popular with international investors this year, the Financial Times reported in a commentary. But changes in key market conditions — including an upsurge in corporate defaults and the renminbi’s slide against the US dollar — raises questions over the sustainability of inflows.

A deepening sense of unease is rippling through China’s financial markets. The benchmark Shanghai stock index has tumbled 20 percent in just five months to enter a bear market, Bloomberg News reported. The yuan is heading for its longest losing streak in four years in Hong Kong. Corporate defaults are mounting. There are homegrown reasons for the concern: the nation’s deleveraging campaign is reducing the amount of liquidity available -- threatening growth in the world’s second-largest economy.

Chinese regulators have freed up an extra $100 billion for bank lending in a move financial analysts said could help to reassure investors amid trade tensions with Washington, the International New York Times reported on an Associated Press story. The reduction on Sunday in reserves banks are required to hold was part of a series of such cuts economists had forecast before the dispute with President Donald Trump erupted. But they said the announcement could help to defuse fears a threatened U.S. tariff hike might dampen Chinese economic growth.

Three years after a wave of forced selling by margin traders fueled a collapse in China’s stock market, a new breed of leveraged shareholders is threatening to trigger another downward spiral, Bloomberg News reported. More than 5 trillion yuan ($770 billion) of Chinese shares, or about 12 percent of the country’s market capitalization, have been pledged as collateral for loans, according to data compiled by China Securities Co. and Bloomberg.

A mad scramble by Chinese property developers to build up their land banks is taking its toll on the industry’s creditworthiness, with builders singled out as having the highest risk of default as channels of credit tighten, Bloomberg News reported. The Bloomberg Default risk model, which tracks metrics including share performance, liabilities and cash flow, shows a 0.87 percent average probability that builders will renege on its obligations in the next 12 months. While the proportion may look small, it’s triple the likelihood of delinquency in the technology industry.

Declines in Chinese stocks and the yuan came to a halt as the government stepped up efforts to limit trade tension fallout, Bloomberg News reported. The Shanghai Composite Index rose 0.3 percent on Wednesday, erasing an earlier loss of 1.2 percent, after plummeting almost 4 percent on Tuesday as investors unwound leveraged positions. The yuan snapped its steepest two-day loss since 2015 after policymakers set the daily fixing at a much stronger level than expected.

A bruising trade fight with the U.S. lands at a difficult time for China as its economy contends with rising headwinds, constraining Chinese President Xi Jinping’s options, The Wall Street Journal reported. While Chinese officials have been bracing for a trade war for months—promising to match the Trump administration measure for measure—signs are rising that China’s recent economic expansion is ebbing, from weakening investment and household consumption to increasing corporate defaults, in part due to a key Xi initiative to contain debt and fend off financial risks.