The latest data points to a rising debt burden amongst many of China’s listed concerns alongside easing growth in revenues and profits.
Data from Wind indicates that excluding banks, non-bank financial institutions and the two energy giants of Sinopec Group and CNPC, the total debt of 3424 Chinese A-share companies stood at 31.74 trillion yuan as of the end of the first quarter of 2018, for an overall debt-asset ratio of 61%, on par with the reading for the end of 2016.
630 listed companies had debt-asset ratios of over 60%, while for 311 the reading was more than 70%, and for 18 companies in excess of 100%.
The 311 companies with debt-asset ratios of over 70% are primarily concentrated in the real estate, utilities, automobile, industrial chemical, machinery and equipment and commercial trading sectors, while 15 of the 18 companies with ratios of over 100% were designated as “special treatment” shares, after posting losses for two or more consecutive years.
In addition to rising debt levels, China’s listed concerns have also seen a decline in their repayment capabilities since the start of 2018.
1915 listed Chinese companies had a current ratio of under two as of the end of the first quarter, while 1163 had quick ratios of under 1, and 460 had cash ratios of under 0.2.
The profitability of China’s corporations is also seeing easing growth, with a report just released by Guotai Junan Securities indicating that Q1 year-on-year growth in the operating revenues of non-financial listed companies was 13.91%, as compared to 21.04% for the whole of 2017.
Net profits saw growth of 24.9% in the first quarter, as compared to 33.21% for last year.
“Overall, growth in the profitability of listed companies is easing, internal cash flow dependence is weak, external cash flow is also entering a period of contraction, and the first quarter of 2018 saw a marked decline in overall repayment capability.”
China has already seen a spate of corporate bond defaults since the start of 2018, as Beijing’s ongoing deleveraging campaign and shadow banking crackdown exacerbate a scarcity of funds.
The latest data indicates that as of 7 May there have been a total of 19 defaults in China since the start of the year, involving a total of ten different entities.
These include DunAn Group, China Security & Fire, Sichuan Coal, Dalian Machine Tools, Dandong Port Group, Bright Oceans Corporation, China City Construction, Shenwu Environmental, Fuguiniao and Chunhe Group.