State Transformer Maker Defaults in China

Published By : 21 Apr 2015 | Published By : QYRESEARCH

A public transformer maker in China is the first to default for onshore bond, which shows the government’s inclination for market forces to decide the fate of any enterprise.  

The unit of the central government owned enterprise China South Industries Group, Baoding Tianwei Group Co defaulted on account of inability to pay US$13.8 million of bond interest. Additionally, Kaisa Group Holdings Ltd became the first developer in China to default for its U.S. currency debt.

So far, only private enterprises have defaulted in the bond market in China although state enterprises have sold the big share of the debt. The default of Tianwei highlights the growing attitude for financial risk. This is further underscored by Premier Li Keqiang’s initiative for a cooling economy and strips the government of power. 

This is probably started of growing default practice in China; the economic crisis has given a blow to many industries. Baoding Tianwei is expected to make payments and raise funds through several means such as asset disposal. As per , China Foreign Exchange Trade System the bond now has rating of B versus AA+ at the time of issuance. 

The company suffered huge losses in the year 2014 although the debt to asset ratio rose quickly. The company also said in a statement, the company has suffered financial ability and capital shortage.  The company is unable to raise funds to repay the interest that is its liability.

Additionally, Baoding Tianwei which is based in Hebei province in Northern China incurred a loss of US$10.14 billion yuan in 2014.
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