China's rating cut exposes firms hooked on dollar bonds

NEW YORK: China’s first credit rating downgrade by Moody’s Investors Service since 1989 couldn’t have come at a worse time for the nation’s companies, which have never been more reliant on the overseas bond market for funding.

While Chinese companies’ foreign-currency debt is only a fraction of the US$9 trillion local bond market, China Inc is on pace for record dollar bond sales this year after the authorities’ crackdown on financial leverage drove up borrowing costs at home. Overseas borrowing has also been part of the government’s strategy to encourage capital inflows in a bid to ease the depreciation pressure on the yuan.