China set for record defaults, and downgrades tip more pain

China is zooming to a record year of corporate—bond defaults, with the 2018 total already more than three-quarters of the previous high even before an expected economic slowdown bites. Chinese companies have reneged on about 16.5 bn yuan ($2.5 billion) of public bond payments so far this year, compared with the high of 20.7 billion yuan seen in all of 2016, according to data compiled by Bloomberg. Strains are set to get worse if the trends of credit-rating companies are anything to go by—agencies including Dagong Global Rating. have been downgrading firms by an unprecedented margin. “Corporate profits have worsened this year and are unlikely to improve against the backdrop of an economic slowdown,” Li Shi, general manager of the rating and bond—research department at China Chengxin International Credit Rating. “Refinancing will continue to be tough as long as the crackdown on shadow banking continues.”