(Adds more details, background)
BEIJING, Dec 29 (Reuters) - China’s state planner on Friday launched a risk inspection campaign aimed at preventing defaults on debt issued by state-owned companies, known as enterprise bonds.
The National Development & Reform Commission said in a statement that the move is part of Beijing’s drive to guard against systemic risks in China’s financial system, which is burdened with severe credit risks.
“In 2018, the credit market faces huge pressure in making principal and interest payments, and the situation in the bond market remains grave,” the NDRC, which overseas the issuance of so-called enterprise bonds, said.
“Bond defaults in some areas have already had a large negative impact on the local financial eco-systems.”
The NDRC said local government agencies will need to conduct checks on state-owned bond issuers and submit a report by Jan. 20 detailing the size of their liabilities, how the proceeds were used, and the progress of relevant investment projects.
It is ordering companies that could default on bonds due to major operational difficulties to report to the NDRC.
The inspections come as Beijing steps up its campaign against excessive leverage and seeks to stop credit flowing into “zombie” companies.
Earlier this year, Moody’s Investors Service and Standard & Poor’s downgraded China’s sovereign rating, citing concerns over the nation’s rising debt. (Reporting by Beijing and Shanghai Newsroom; Editing by Shri Navaratnam and Sam Holmes)