Photographer: Qilai Shen/Bloomberg via Getty Images

As Xi Preaches on Risk, China Companies Are Reining in Leverage

  • Beijing is cracking down on debt as part of de-risking drive
  • Corporate leverage started to fall at the end of 2016: Goldman

China’s deleveraging drive shifted into high gear in April, when President Xi Jinping emphasized the priority at a gathering of the Communist Party’s Politburo. But according to Goldman Sachs Group Inc., companies had started cutting back even before then.

Corporate leverage in China fell for the first time in five years at the end of 2016, with gross debt dropping to 2.1 times EBITDA and the ratio for net debt down to negative 0.2, Goldman’s analysis shows. Companies active in upstream sectors bore much of the responsibility for the decline in “corporate distress,” analysts including Kenneth Ho, Goldman’s head of Asia credit research, wrote in a research note Friday.

Data compiled by Bloomberg also indicates debt levels for Shanghai-listed firms have receded this year:

— With assistance by Emma O'Brien

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