Investors usually find comfort in the PBoC’s war chest of US$3.1 trillion in foreign exchange reserves. Sure, it could – and will – step in to ease the dollar-funding pressure on banks. But the moment the lender of last resort starts tapping reserves, sentiment will be hit, and then it’s a question of resilience.
PUMMELLED by the coronavirus, China Inc now faces another disruption: a global shortage of dollars.
Chinese companies are looking at US$120bil of debt repayments this year on their US dollar-denominated debt. Real estate developers and industrial companies make up three-quarters of the outstanding US$233bil of junk-rated bonds. There’s another US$563bil of higher-rated debt. The question isn’t just whether they’ll be able to pay their debt. It’s worth wondering how they can access the needed dollars – and at what cost.
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