Chinese company bonds have hit bankruptcy while Beijing strengthens debt

When China Fortune Land Development ran out of $ 530m US dollar bond in February, the manufacturer did not rush to tell its sellers.

“He didn’t say we were ‘wrong’,” recalls one of the maritime company’s salesmen, who had just gotten through a third trustee. The retailer added that China Fortune consultants, whose organizations are BlackRock and HSBC, said they would have to wait for maritime debt to be treated for the first time.

China Fortune, which builds industrial facilities and has another $ 4bn debt, is one of the largest companies in the country forced to repay loans while Beijing strengthens its debt. With more than $ 100bn of debt borrowed by Chinese companies in international markets coming this year, the global economy is on the move.

Last year, Chinese companies failed on record $ 7.3bn of offshore mortgage debt and $ 22.7bn worth of renewable bonds. In 2021, it lost about $ 3.3bn in dollars, according to Fitch’s accounting agency, or much of what was expected for a full year before the epidemic.

Among other names the business owners are complaining about is Peking University Founding Group, a state-owned company that owes billions of overseas bills and is being rehabilitated.

China Fortune declined to comment.

These challenges come as Beijing he wants to be careful a resilient financial recovery from the heavily indebted Covid-19. “It is clear that the Chinese government is looking for a more intelligent market,” said Jimmy Lim, chief executive of Modular Asset Management, a Singapore hedge fund.

The collapse of the stock market has also forced retailers around the world to reconsider the amount of money the Chinese government provides financial services to potential investors. Foreign investors have long thought so Beijing rescues government-sponsored groups.

Anxiety about government support has been fueled by developments in China Huarong Asset Management, the country’s chief executive officer, who $ 22bn loan in dollar bills. The value of some of the foreign bonds offered by the group, most of them to the finance ministry, dropped to 57 cents a dollar last month after the delay in releasing the 2020 financial results. was killed in January on financial cases.

The same Huarong companies now sell for 66 cents per dollar.

Chinese retailers are facing a higher interest rate than $ 118bn this year, according to Refinitiv. But even this is much lower with the Rmb7.8tn ($ 1.2tn) offshore marital debt maturing in 2021. The latter figure could have serious repercussions for those in the export-oriented industry, especially if maritime debt restructuring is underway.

“The ups and downs are a reflection of what is going to happen on the land,” said Soo Cheon Lee, founder and chief financial officer at SC Lowy, a troubled Hong Kong manager. In the case of China Fortune, he added, “even the upper castes are trying to figure out what’s going on”.

Rehabilitation measures in China can be reduced. More than one-fifth of the companies that have failed to resume since the beginning of 2018 have not completed the restructuring, said Shuncheng Zhang, China’s managing director of Fitch.

Maritime offenses are often resolved through Chinese courts, Zhang said, meaning they take much longer than what they receive in courts of foreign countries.

The case of China Fortune has been complicated by the strong presence of other countries. Ping An, one of the world’s leading insurers, is both a fundraiser and a member of a company’s credit union. Other members of the committee include Chinese banking and insurance regulators and the state-funded government in Hebei province, whose failure to pay China Fortune for construction work has helped keep it afloat.

Foreign investors with more than $ 1.5bn in China Fortune loans have formed their own committee.

Ping An suffered a $ 2.8bn crash from China Fortune through debt and justice in the first quarter. An expert at the International Accounting Agency said, therefore, regulators may reconsider the amount of Chinese insurance assets they should have.

This could leave manufacturers with less money, which accounts for an annual supply of goods in Asia, according to S&P.

Lee Low’s SC Lowy called the recent rise in unpaid wages “a shock, since much of China’s economy is good”. Although strong economic growth, he said, Beijing’s skepticism over bail means that the number of such offenses could occur in recent years.

However, Lee said the government will take steps to reduce the loss of expatriates, as globalization is a key factor in the financial viability of Chinese companies.

China, he said, “can’t just pressure the sea boys, because most of the time China Inc also needs sea money”.