Research On Debt Risk Of Private Enterprises

China’s economy has entered a new normal period.In recent years,the government has actively promoted supply-side reforms,and the restructuring of structural capacity-to-capacity policies has been continuously introduced.The credit risk of the bond market is accelerating.In the case of slowing economic growth and slowing liquidity,the cash flow of enterprises at the micro level continues to deteriorate,and the risk of credit defaults continues to break out.Especially in 2018,the Chinese bond market was in high default,and 43 new default issuers were issued in the bond market.The balance of outstanding bonds issued by the issuer of the first default was 1412.68 billion yuan.The number and amount of bonds involved far exceeded those of previous years.The high correlation between high leverage and the financial crisis has determined that deleveraging has become an important part in China’s economic development.Since the Central Economic Work Conference that held in December 2015,de-leveraging has become an important task for China’s supply-side structural reform.De-leverage has ensured that China’s economy will be able to develop healthily and orderly.However,in the process of deleveraging,there are lots of incidents that liquidity crunch has led to debt crisis which deserves attention.Taking Dunan company,the famous private enterprise of Zhejiang Province,as an example,this paper study on the default risk of private enterprises during the new normal period.In May 2018,Dunan Company stuck in the debt crisis.It said that after the de-leverage began in the second half of 2017,the market funds have tightened,which has caused difficulties in the issuance of bonds and rising financing costs.A large amount of self-owned funds have experienced serious liquidity problem,with more than 45 billion interest-bearing liabilities.The Dunan Group temporarily solved the bond redemption crisis by selling assets,reducing the shares of its listed companies,syndicated loans,and the government’s help after the crisis broke out.The company still has many problems in operations.This paper adopt quantitative analysis which consists of analysis of debt composition status,horizontal and vertical comparison of financial indicators and evaluation of debt risk model,also make furtherqualitative analysis on the causes of debt crisis and give some suggestions.According to the research and analysis of this paper,it is found that macro environment is one of the reasons that leads to the debt crisis of Dunan Company,but the primary reason is its radical development strategy,issuing debt blindly without the consideration of company’s profitability and did not pay attention to prevent the company’s financial risks.This incident is a microcosm of the process of deleveraging that crisis break out in private enterprises during the liquidity squeeze period in that high leverage operation,which is a warning to government,enterprises and investors.After the debt crisis,Dunan Company should pay more attention to innovation to increase efficiency,decrease the debt scale while cut interest and cost,restrain the expansion of debt,and strictly control of capacity and reduce new debt in the next step of deleveraging.For government,they should follow the principle of proportionality.government should also improve China’s capital market,strengthen the direct financing ability in market of enterprises,and promote enterprise reform and industrial restructuring.Other companies should also learn the lesson,moderate debt,optimize the capital structure,and pay attention to internal management and establish an early warning mechanism for financial risks.