A state-owned Chinese group caught up in the country’s spate of defaults owes billions of dollars to lenders, raising concerns that bond market tremors could also sweep through the banking sector.
According to a creditor document viewed by the Financial Times, almost 70 Chinese and foreign banks, as well as trust companies, had Rmb33.5bn ($5.1bn) in outstanding lending to Huachen Automotive Group as of last year. The revelation comes as the country’s multi trillion-dollar debt markets have been rocked by defaults at government-backed companies.
The defaults have shattered a longstanding belief among investors that local governments in China will always bail out troubled state-backed groups and have prompted fears about the health of the broader financial system.