The recent soaring of the Shanghai Interbank Offered Rate (Shibor) has weakened investors' confidence in the capital markets and caused a sharp decrease in the Chinese stock market, while tighter controls on release of capital by banks in China will also negatively impact availability of credit for domestic enterprises with high energy consumption and high emissions levels, including enterprises in the steel, cement and electricity sectors, according to a report by China Securities Journal.
At the end of the first quarter this year, the overall debt-to-asset ratios of the construction materials sector, the electricity sector and the steel sector in China were 77.01 percent, 70.89 percent and 65.25 percent respectively. In the first three months of this year, the combined short-term and long-term loans of listed steelmakers in China totaled RMB 388.2 billion ($63 billion).
In recent years, credit financing by commercial banks in China provided major support for the expansion of domestic steelmakers. However, with the sharp decrease in the profitability of Chinese steelmakers and the stricter requirements enforced by government policies, banks are now less enthusiastic about providing credit support for Chinese steelmakers.
One representative of a Chinese state-owned bank stated that their loans would focus on steel enterprise projects involving high value-added product development, energy saving and technology upgrades.