Chinese Companies Tapping Debt Markets at Frantic Pace

What can go wrong?

As the slowing economy cuts earnings, companies increasingly need fresh note offerings to pay off old obligations, according to China Securities Co., the top arranger of bond offerings from state-owned and listed firms. It forecasts issuance of corporate notes will jump at least 30 percent in 2016 to top 10 trillion yuan ($1.54 trillion), more than the annual economic output of Spain.

“It’s urgent to solve some companies’ liquidity problems, as profitability has worsened given the slowing economy,” said Ji Weijie, a bond analyst at Beijing-based China Securities. “If they can’t roll over their debt, there may be bigger default risks or even systemic risks.”

Chinese companies are being encouraged to tap foreign bond markets, aka greedy incompetent westerners, to bridge liquidity gaps. In other words, they are actively pursuing a policy to transfer systemic risk of their shit-filled companies from them to us.

I am sure this will end nicely.