Thursday, March 28, 2024
Hometrader talkClouds gather around Chinese solar company, raise credit risk

Clouds gather around Chinese solar company, raise credit risk

China's is down sharply, amid concerns that a bond default by a major Chinese solar firm will stoke the embers of credit risk in the world's second largest economy.

Solar equipment producer Chaori Solar said it may not be able to make an 89.8 million yuan ($14.6 million) interest payment that is due on March 7.

This is getting a lot of attention because it would be the first Chinese default of an onshore bond. The country's solar industry is heavily subsidized by the government and has enormous overcapacity. Prices for photo-voltaic cells have dropped dramatically.

But this goes beyond the renewable energy sector. There is enormous overcapacity in many Chinese industries, such as steel and coal. Chinese companies have issued enormous amounts of debt in the past several years, so a default will definitely raise the issue of credit risk.

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