Skyscrapers in the financial district of Pudong in Shanghai. Photo: Reuters, Aly Song

Bond issuances have plummeted to less than a fifth of 2016 levels over the first four months of this year, amid capital controls and crackdowns on shadow banking, reports Reuters. This comes as firms are under pressure to refinance US$130 billion of debt due by the end of this year and US$248 billion more in 2018.

The tightening puts the most pressure on heavy industry facing cuts in capacity and smaller firms without access to offshore markets.

“There is a wave of debt repayments due between the second quarter of 2017 and the first quarter of 2018, representing about two to three times the amount currently being issued each quarter,” Reuters quoted Cedric Rimaud of Gimme Credit as saying.

Rimaud added that “A number of defaults have already happened and we expect that there will be more this year.”

The outlook comes on the heels of steep increases in defaults over the past several years. According to estimates from Goldman Sachs, defaults grew to 53.9 billion yuan last year, up from 18 billion in 2015 and 1 billion the year before.

London-based Mathew Phan of CreditSights implored that “it is important for China to re-open the corporate bond market,” in reference to the collapse of onshore bond issuance. Phan says that the first two months of this year saw the contribution from local government and corporate bond issuance to net new financing plummet to zero from more than 40% in 2016.