MNI China Press Digest May 25: Merkel & Trade, Bond Defaults

     BEIJING (MNI) - The following lists highlights from the Chinese press for

Friday:

     Chinese Premier Li Keqiang said China and Germany will continue their

two-way investment with a more open and inclusive mindset, according to the

website of the State Council. Both countries support multilateralism and free

trade amid the current complicated international environment, Li said during a

Thursday meeting with German Chancellor Angela Merkel. Germany is against

protectionism and defends free-trade rules. Cooperation between the two nations

will contribute to continued economic progress: Merkel. Li and Merkel expressed

a willingness to cooperate in autonomous driving, AI, and Internet of vehicles. 

***Comment: Merkel arrived in China at Trump's request to start an investigation

on whether imported vehicles threaten U.S. national security. The industry is

expected to impact the German economy given it is one of the largest car

exporters to the U.S. As China and the U.S. reached an initial agreement in

Washington last week, Germany, China's biggest European trading partner, is also

working to maintain its trading position with China.

     China's recent private company bond defaults reveal the risks facing

individual companies, but do not pose systemic financial risks, a top financial

regulator of the bond market said, according to Shanghai Securities News. As

China's liquidity tightens, private companies' various problems, such as high

leverage, high-risked investment activities, and unsustainable debt structures,

caused bond defaults; the new WMP rules also increases pressure on commercial

banks, reducing funds for private companies, the unidentified regulator told the

newspaper. More bond defaults are likely to happen if China's macro-economic

environment does not change significantly, but the default rate should be far

lower than banks' bad loans rates and the situation is controllable, the

regulator said. Regulators are taking measures to study and create a trading

system for transferring defaulted bonds to third-parties such as private funds

and AMCs.

     Highly leveraged property companies are facing increasing headwinds to

further debt accumulation, Economic Information Daily reported. As of the end of

March, debt ratio of half of listed Chinese property companies exceeded 70%

while around 40 reached more than 80%, the newspaper said. As property controls

continue to take effect, the government's restrictions for developers' financing

increase, and profits decline, some property companies are facing pressure.

Developers, including Evergrande, Ronshine and Minmetals Land, expressed a

willingness to reduce debt ratios amid strengthening regulation and tight

financing.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: iris.ouyang@marketnews.com

--MNI Singapore Bureau; +65 8233 2326; email: Asia-Editor@marketnews.com

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