Very. From Macquarie Bank comes a series of charts examining the relationship between debt and cash flow in corporate China which finds:
…the percentage of EBIT-uncovered debt went up from 19.9% in 2013 to 23.6% last year, and the percentage of EBITDA-uncovered debt up from 5.3% to 7%. Therefore, there has been a further deterioration in financial soundness among our sample.
And for the construction bubble sectors the situation is far worse. The ratio of firms with “uncovered debt” in 2007 was excellent:
By 2013 it had sickened mightily:
Then last year it reached half:
And now:
Given the slumps in metal and coal prices so far this year, it’s quite likely the curve will have deteriorated further for commodity firms this year, with total debt getting better in the meantime.
A big accident is building in the Chinese economy based around steel, coal, cement and base metals.
