BEIJING – May 9, 2019 – By 2019, the Chinese bond market may face the biggest default in its history, the Bloomberg news agency reported.
According to data released by the agency, in the first four months of 2019, Chinese companies did not write off national securities worth 39.2 billion yuan/$5.8 billion. That’s about 3.4 times more than in the same period in 2018.
According to analysts quoted by Bloomberg, if there are no changes, the year 2019 will have maximum debt defaults. At the same time, these analysts also failed to predict the U.S actual economic collapse of 2007, of which it has yet to recover.
These wishful thinking experts believe that this situation is due to the policy of the Chinese government, which aims to counter the parallel banking system. Parallel credit institutions allow decisions to be taken on lending with less control by the regulators.
This has led to a reduction in funding they claim, which explains the increase in debt default cases, which began in late 2017 and continues to this day. According to the rating agency Moody’s, the short maturity of securities means that companies often resort to refinancing.
At the same time, banks are reluctant to lend to less robust firms, which in turn have become accustomed to borrowing from parallel banks, whose numbers continue to decline because of the new regulatory policy.
In response to the possible increase in tariffs on Chinese products to 25%, Beijing is preparing a package of measures to stimulate the national economy.
In particular, it is expected to cut taxes, stimulate the purchase of home appliances and automobiles, and further reduce interest rates, aiming for credit growth, especially for small businesses that are the most vulnerable during the trade wars.
The trade war between China and the US has an impact on China’s economy, but that influence is under control, said the head of China’s National Bureau of Statistics, Ning Jizhe.
“I have to say that trade and economic disruptions have an impact on the functioning of the economy, but that influence is generally under control,” Ning stressed at the press conference, during which the country’s economic results were announced in 2018.
According to published data, Gross Domestic Product (GDP) growth was 6.6%, the slowest pace since 1990, but this coincided with the official forecast of the authorities. At the same time, the country’s GDP growth slowed over the year from 6.8% a year in the first quarter to 6.4% in the fourth quarter.
Ning Jizhe pointed out that trade and economic disagreements between China and the US began to unfold in the second quarter of last year. The Chinese government has taken a series of measures to ensure stability of employment, financial sector, foreign trade, foreign capital and investment.
“If we look at the economic side, this is generally acceptable, as the fourth quarter has a greater influence on the international situation. If we talk about trade and economic frictions, they influence not only the economy of China and the US, but also the whole economy. global economy,” he explained.
The senior official stressed that China’s domestic market has enormous potential. Trade disputes with Washington should not change the nation’s key economic development vector, which is highly resilient to shocks.
In early December, US President Donald Trump and his Chinese counterpart Xi Jinping came to a truce in their trade war after the G20 summit meeting in Buenos Aires.
China and the United States have been embroiled in trade disputes since US President Donald Trump applied 25 percent tariffs on Chinese goods worth up to $ 50 billion in June 2018. Beijing accused Washington of starting a trade war and retaliated with similar measures. Since then, the two countries have imposed several rounds of trade tariffs and additional taxes against each other, affecting their economies.