China Tops U.S. in Corporate Debt Issuance; S&P Warns Slowing Economy, Weaker Financial Conditions Pose Risks
SHANGHAI--China has overtaken the U.S. as the world's largest issuer of corporate debt, but a slowing Chinese economy and the weakened financial health of its companies are creating risks globally, according to Standard & Poor's Ratings Services.</br></br>The assessment by the U.S. rating firm echoes increasing concerns over the health of China's financial system, as stresses rise among struggling property developers and cash-strapped local governments. Adding to the worries is the fact that Beijing has started allowing some small, private borrowers to default on loans and bonds, suggesting a reduced willingness by the state to bail out troubled firms.</br></br>In a report released on Monday, S&P said it expects companies around the world to seek up to $60 trillion in new debt and refinancing between 2014 and 2018, an increase from an estimated $53 trillion for the 2013-2017 period. Asian-Pacific corporate issuers will likely account for half of the $60 trillion, and more than half of the $72 trillion in debt the ratings company projects will be outstanding in 2018.</br></br>China now has more corporate debt outstanding than any other country, having surpassed the U.S. in 2013, a year sooner than S&P originally expected, the rating firm said.</br></br>Although Beijing has tried to rein in credit growth to reshape an economy that has depended on big investments, such as infrastructure projects, an abundant supply of cash at Chinese banks and large capital expenditures by state-owned enterprises have allowed corporate debt to build up quickly in recent years, it said.