China Financial Daily:Evergreening continues

Debt committee for 155 SOEs in Heilongjiang province has decided toinnovatively renew outstanding loans without principal repayment to SOEswho are temporarily confronted with financial difficulties, and HeilongjiangJianlong Steel Co. and Heilongjiang Longmay Mining Holding Group, the twolargest state-owned steel and coal enterprises in Heilongjiang province, haveenjoyed the renewable loans from banks via that method, Caixin reported,citing Director of CBRC Heilongjiang Branch Bao Zuming as saying.

    (DB View) This is a typical case of evergreening loans. Based on our estimate,there were Rmb13tr evergreening corporate credit, accounting for 12% of totalcorporate credit in 2016, which is higher than 10% in 2015. While corporatecash flow improved in 2016 due to reflation, corporate debt balance still grewfaster than corporate cash flow. Please refer to our report The degree ofevergreening and Debt 101 for more details.

    CMB, MSB, BOC, CNCB and CEB’s Guangzhou branches are said to haveraised the yields for negotiable certificate of deposit (NCDs) by 40% in averageto attract investors and compete for funds, preparing for June-end regulatoryassessment. For instance, the yield of a private 3-year NCDs product withinvestment threshold of Rmb0.5mn was increased by 41.8% to 3.9%, citing abanker in Guangzhou branch as saying.