Zombies Spreading Shows Chaori Default Just Start: China Credit

The number of Chinese companies with debt double equity has surged since the global financial crisis, suggesting the first onshore bond default won’t be the last.

Publicly traded non-financial companies with debt-to-equity ratios exceeding 200 percent have jumped 57 percent to 256 from 163 in 2007, according to data compiled by Bloomberg on 4,111 corporates. The yield on five-year AA- notes leapt 13 basis points in two days to 7.82 percent on March 6, the most in almost four months, after Shanghai Chaori Solar Energy Science & Technology Co. said it won’t be able to fully pay an 89.8 million yuan ($14.7 million) coupon due today on its March 2017 bonds. Chaori Vice President Liu Tielong said in an interview today the company still can’t make the payment.