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Corporate Defaults on the Rise

On June 19, citing statistics published by UBS Securities, Security Times reported that defaults in China are likely to increase and occur on a large-scale. 

Since the first quarter of 2014, there have been signs of a credit crisis, including downgrades in credit ratings. On March 4, solar equipment producer Shanghai Chaori Solar Energy Science and Technology Co. Ltd. announced it would not be able to make the interest payments that were due on its bonds. This became China’s first-ever domestic bond default. On March 20, 2014, the Shanghai Stock Exchange ordered loss-making Chinese solar cell maker Baoding Tianwei Baobian Electric Co. Ltd. to temporarily delist its "11 Tianwei Bonds." Trading on the bonds had been suspended since March 10 when the company announced that it had posted a loss of 5.23 billion yuan (US$844.51 million) for 2013. That was its second straight year of losses. Increasing numbers of firms are in default. 
The amount involved in the defaults has reached 53.6 billion yuan (US$8.71 billion). The defaults are concentrated in medium to large businesses in real estate and machinery manufacturing and have spreading to over six major cities and provinces. These defaults will likely lead to bankruptcies in real estate and in financial institutions. 

Source: Securities Times, June 19, 2013