China’s steel plants are facing increasing pressure from growing credit tightness. Many steel plants are heavily indebted and dependent on short term debt. As a result, a number of steel plants defaulted on their loans, the effect of which is felt far beyond the local economy in which the steel plant operated. In this insight, we investigate the reasons for this new trend, and the implications of the potential for more defaults.
Table of contents
Credit availability dries up as money supply tightens
Rising short term debt increasing vulnerability to a credit shock