China’s economic collapse is on the way as many of the country’s biggest private companies are struggling to manage excessive debt. Corporate debt in China stood at 155 per cent of gross domestic product at the end of first quarter of 2019, much higher than other major economies. Risks of large-scale corporate defaults are mounting in China. By comparison, Japan's corporate debt level is 100 per cent of GDP and the US’ is 74 per cent, respectively. In the past decade, China's overall debt quadrupled, to around three times the value of previous year's national output. Corporate debt contributes two-thirds of the total, or more than $26 trillion dollar last year, based on the report by Bank for International Settlements. This is not a good sign to the China's economy considering the fact that companies run by the government are the main contributors of this debt. Signs of economic collapse are being portrayed by some of the private companies which have been experiencing serious difficulties lately.
This first bank takeover by regulators in China in decades caused near panic that spread into the entire money markets and bonds and it has resulted to lot of panic in the financial sector. The corporate bond market is just a very small part of the whole credit puzzle in China but it is a little more transparent compared to the bank lending and this sheds light on the increased borrowing and debt defaulting by private companies in China.
Last year, about 18,000 companies filed bankruptcy petitions with Chinese courts and this is almost twice the number that was recorded in the previous year. The number of defaults on bonds also hit a record high last year, Neoglory's default included and the current data shows that the default rate is five times the number recorded in 2015 and this has raised concern to many people on whether China is headed for an economic collapse.
All this was happening when china was experiencing an economic downturn and Neoglory's default of debt is a reflection of the struggle most companies in China are experienced and this combined with the continuous trade disputes between China and U.S. might cause a unexpected economic collapse.
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