Liaoning province is the weakest link. It wouldn't be too long before the whole ponzi chain collapses. It's ironic that the financial seismic catastrophe starts quaking from Dandong that deals with North Korea.
China’s debt time bomb ticking loudest in Chinese port bordering North Korea as liabilities top US$7 billion
A debt time bomb is ticking at Dandong port in northeastern China, whose operator – according to corporate filings and analysts – has accumulated liabilities of 46.5 billion yuan (US$7 billion).
Dandong Port Group, which manages the largest Chinese port trading with North Korea, failed to settle 1 billion yuan worth of bonds that matured at the end of October.
The default raised questions over its ability to honour a further 6.95 billion yuan worth of publicly traded bonds and bills, two thirds of which will mature at the end of next year.
A fixed-income manager who works in China’s interbank market, where much of Dandong’s debt is bought and sold, told the South China Morning Post that the chances of the company repaying the bonds were “not good”, based on publicly available figures.
As well as defaulting on its debt obligations, Dandong Port has failed to pay its workers on time.
According to its own data, as of the end of September 3,300 employees were owed 43 million yuan in unpaid wages.
One worker, who asked not to be identified, told the Postthat it was common for wages to be late.
“I still have one month’s salary unpaid,” he said.
Another employee said the company had also refused to honour pension payments for the past three years.
Dandong Port’s debt problems are typical of the economic woes facing China’s rust belt region.
According to central bank governor Zhou Xiaochuan, excessive debt is a major source of financial risk. China’s overall leverage ratio was “higher than the international alarm line” and the fundamental source for its financial fragility, he wrote in an article published this month.
Corporate defaults are not uncommon in Liaoning.
Last year, Dalian-based Dongbei Special Steel defaulted on more than 7 billion yuan worth of bonds. A restructuring plan was started, which saved the company, but only after its creditors lost 78 per cent of their money.
Just last week, a court in Dalian declared Dalian Machine Tools Group bankrupt after it repeatedly failed to repay its debts.
The troubles facing Dandong Port began to show last year. In January 2016, the company sold 2 billion yuan of five-year bonds with an annual coupon rate of 5.5 per cent. By November the same year, however, it was forced to raise the coupon to 8.5 per cent to sell 550 million yuan worth of bonds.
All the money raised was used to repay bank loans, according to the company’s annual report for 2016.
China’s debt time bomb ticking loudest in Chinese port bordering North Korea as liabilities top US$7 billion
A debt time bomb is ticking at Dandong port in northeastern China, whose operator – according to corporate filings and analysts – has accumulated liabilities of 46.5 billion yuan (US$7 billion).
Dandong Port Group, which manages the largest Chinese port trading with North Korea, failed to settle 1 billion yuan worth of bonds that matured at the end of October.
The default raised questions over its ability to honour a further 6.95 billion yuan worth of publicly traded bonds and bills, two thirds of which will mature at the end of next year.
A fixed-income manager who works in China’s interbank market, where much of Dandong’s debt is bought and sold, told the South China Morning Post that the chances of the company repaying the bonds were “not good”, based on publicly available figures.
As well as defaulting on its debt obligations, Dandong Port has failed to pay its workers on time.
According to its own data, as of the end of September 3,300 employees were owed 43 million yuan in unpaid wages.
One worker, who asked not to be identified, told the Postthat it was common for wages to be late.
“I still have one month’s salary unpaid,” he said.
Another employee said the company had also refused to honour pension payments for the past three years.
Dandong Port’s debt problems are typical of the economic woes facing China’s rust belt region.
According to central bank governor Zhou Xiaochuan, excessive debt is a major source of financial risk. China’s overall leverage ratio was “higher than the international alarm line” and the fundamental source for its financial fragility, he wrote in an article published this month.
Corporate defaults are not uncommon in Liaoning.
Last year, Dalian-based Dongbei Special Steel defaulted on more than 7 billion yuan worth of bonds. A restructuring plan was started, which saved the company, but only after its creditors lost 78 per cent of their money.
Just last week, a court in Dalian declared Dalian Machine Tools Group bankrupt after it repeatedly failed to repay its debts.
The troubles facing Dandong Port began to show last year. In January 2016, the company sold 2 billion yuan of five-year bonds with an annual coupon rate of 5.5 per cent. By November the same year, however, it was forced to raise the coupon to 8.5 per cent to sell 550 million yuan worth of bonds.
All the money raised was used to repay bank loans, according to the company’s annual report for 2016.
