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S&P expects more China corporate defaults in 2020

China will continue to face elevated corporate credit and default risk in 2020 amid refinancing uncertainty for speculative-grade issuers and the government's weakening appetite for rescuing ailing state-related firms, S&P Global Ratings said in a report, noting that the likelihood of credit downgrades is greater than that of upgrades.

S&P Global Ratings expects corporate defaults to increase again in 2020, citing tight refinancing conditions for weaker borrowers. Onshore defaults topped 130 billion yuan in 2019, surpassing the total defaults in 2018.

Chinese companies face 6.5 trillion yuan in effective onshore maturities in 2020, an expected increase from 6.3 trillion yuan in 2019. Offshore maturities are projected to rise slightly in 2020 and reach a peak in 2021, from $89 billion in 2019.

"We expect a mild relief in operating performance for our rated China corporates in 2020, helping stronger borrowers climb steep maturity walls," said S&P Global Ratings China Country Specialist Li Chang.

Sectorwise, local government finance vehicles are expected to face the highest maturity wall this year with about 2 trillion yuan, constituting more than 35% of total maturities.

Li said the Chinese government is expected to be "increasingly tolerant" of defaults including by state-owned enterprises.

Tewoo Group Co. Ltd.'s U.S. dollar-bond default in late 2019 was China's first instance of debt restructuring by a state-owned entity in more than 20 years and may be the first of many such defaults, S&P Global Ratings predicted in a report published Dec. 12.


" data-original-title="">Nov. 25, 2019, S&P Global Ratings said it expects corporate onshore bond defaults in China to hit a high in 2020, along with offshore bond defaults climbing into 2021.

As of Jan. 15, US$1 was equivalent to 6.89 Chinese yuan.

ffshore bond defaults climbing into 2021.

As of Jan. 15, US$1 was equivalent to 6.89 Chinese yuan.