China

Chinese importers have defaulted on at least 500,000 tonnes of U.S. and Brazilian soybean cargoes worth around $300 million, the biggest in a decade, as buyers struggle to get credit amid losses in processing beans. Three companies in the eastern province of Shandong had defaulted on payments for shipments as they were unable to open letters of credit with banks, trade sources said on Thursday. A string of defaults on loans, bonds and shadow banking products in recent weeks has highlighted rising credit risks in China, partly fuelled by signs the economy is slowing.

A small manufacturer of polyester yarn based in China's wealthy Zhejiang province has declared bankruptcy, threatening its ability to meet an interest payment on a high-yield bond due in July, Reuters reported. Zhejiang Huatesi Polymer Technical Co Ltd asked a local court for bankruptcy protection in early March, according to an announcement on the website of the Anji County People's Court. The firm sold 60 million yuan ($9.7 million) in bonds in a private placement in January 2013 at an interest rate of 11 percent.

Chinese banks are stuck in a lose-lose legal battle between domestic shipyards and foreign buyers over billions of dollars in refund guarantees that are supposed to be paid out if shipbuilders fail to deliver on time, Reuters reported in an insight. One in three ships ordered from Chinese builders was behind schedule in 2013, according to data from Clarksons Research, a UK-based shipping intelligence firm. Although that was an improvement from 36 percent a year earlier, it was well behind rival South Korea, where shipyards routinely delivered ahead of schedule the same year.

Shanghai Chaori Solar Energy Science & Technology Co., the first Chinese company to default on corporate bonds onshore, said a bondholder is seeking to force it into bankruptcy restructuring, Bloomberg Businessweek reported. The manufacturer received a letter on April 3 from Shanghai Yihua Metal Materials Ltd. saying the creditor had submitted a petition to Shanghai No. 1 Intermediate People’s Court, according a filing by Chaori to the Shenzhen Stock Exchange yesterday. Chaori said it doesn’t know whether the court will accept the case and whether the restructuring will proceed.

China's government, concerned that the economy is faltering, said it would target more spending to boost growth, but it left unanswered a question over whether monetary policy will be eased as well, The Wall Street Journal reported. China's State Council, the government's executive body, unveiled Wednesday a combination of spending moves to rev up China's economic engine. They include additional spending on railways, upgraded housing for low-income households and tax relief for struggling small businesses.

China's rating agencies are likely to keep a long-held assumption of government bailouts built into most ratings despite the country's first domestic bond defaults and warnings from Beijing that there is no blanket guarantee of support, Reuters reported. Last month, Shanghai Chaori Solar Energy Science and Technology (Chaori), defaulted when it missed an interest payment on a bond, and this week a newspaper reported a small construction materials company had also defaulted on an interest payment.

Is China different? Or must its borrowing binge, like most others, end in tears? This is now a hotly debated topic, the Financial Times reported in a commentary. On one side are those who predict a Chinese “Minsky moment” – a point in the credit cycle at which, as Hyman Minsky foretold, panic grips the financial system. On the other side are those who insist that China’s debt mountain poses no threat to the planned growth of the economy: the authorities say it will be above 7 per cent and above 7 per cent it will be. Which side is right? “Neither” is my answer.

The Securities and Futures Commission has obtained a Hong Kong court order to appoint interim receivers to take over the management of decorative paper maker Qunxing Paper after its major subsidiary secretly started a bankruptcy proceeding on the mainland, the South China Morning Post reported. The regulator said yesterday that it got an order from the Court of First Instance, for which it urgently applied last Friday, to appoint Roderick Sutton, Fok Hei-yu and John Batchelor of FTI Consulting to act as interim receivers to investigate Qunxing's affairs.

The specter of default in China’s trust loans market is deepening the distress of property developers that also borrowed in dollars, Bloomberg News reported. Eighteen companies owing $15.2 billion, from behemoth China Vanke Co. to junk-rated Glorious Property Holdings Ltd., have “material exposure” in excess of 10 percent to trust financing, a form of non-bank lending that’s helped homebuilders proliferate in China, Moody’s Investors Service said. This year alone, the number of Chinese junk developer bonds whose yields have increased to distressed levels has almost doubled to 19.

China’s biggest banks more than doubled the level of bad loans they wrote off last year, in a sign that financial strains are mounting as growth in the world’s second-largest economy slows, the Financial Times reported. The five biggest Chinese banks, which account for more than half of all loans in the country, removed Rmb59bn ($9.5bn) from their books in debts that could not be collected, according to their 2013 results. That was up 127 per cent from 2012, and the highest since the banks were rescued from insolvency, recapitalised and publicly listed over the past decade.