[Asia Economy Beijing=Special Correspondent Park Sun-mi] As the COVID-19 outbreak shakes the financial markets, Chinese companies are also facing difficulties in repaying their dollar debts.
On the 12th, Hong Kong's South China Morning Post (SCMP) reported that due to the turmoil in the global financial markets over the past two weeks, it has become difficult for Chinese companies to issue additional dollar bonds to repay existing debts.
According to global financial information company Refinitiv, the issuance of high-yield dollar bonds by Chinese companies in February this year shrank to $2.87 billion, less than one-third of the $9.16 billion issued in January.
The newspaper pointed out that side effects are already being observed among Chinese companies with heavy debts who are unable to issue additional dollar bonds, and although the People's Bank of China is trying on its own to reduce companies' financing costs, the difficulty in issuing dollar bonds is undermining the effectiveness of these efforts.
Chang Li, an analyst at global credit rating agency S&P, explained, "Although COVID-19 is somewhat controlled within China, the global spread could cause secondary damage to the Chinese economy," adding, "At least in the first half of this year, Chinese companies may face challenges of worsening cash flow." Chang Weiliang, a strategist at DBS Bank, also said, "Due to the spread of COVID-19, 2020 will be a challenging year for Chinese companies trying to issue dollar bonds."
SCMP expressed concern that China currently holds about $2.3 trillion in U.S. dollar debt, and if Chinese companies continue to fail to issue additional dollar bonds, it could negatively affect China's ability to defend its exchange rate when the yuan exchange rate fluctuates significantly.
Meanwhile, the Chinese government has consistently stated that the economic impact of COVID-19 on China is limited.
Geng Shuang, spokesperson for the Chinese Ministry of Foreign Affairs, said at a regular briefing held yesterday afternoon that despite the spread of COVID-19, major countries are not moving industries and supply chains from China to other countries, and stated, "The impact of the COVID-19 outbreak on the Chinese economy is short and limited." He added, "The fundamental strength that allows the Chinese economy's growth to continue over the long term remains unchanged and is being maintained."
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