THE default by China Shanshui Cement Group Ltd. is forcing more Chinese companies to scrap bond sales as yields surge.

    About 43 companies have canceled or delayed 46.7 billion yuan (US$7.3 billion) in notes since the cement maker issued a default warning Nov. 5 before missing the payment, according to statements to Shanghai Clearing House and Chinamoney.

    In the 10 trading days after Baoding Tianwei Yingli New Energy Resources Co. defaulted last month, only nine companies scrapped a total of 8.8 billion yuan in bond issuance.

    “Investors didn’t expect Shanshui’s default because it appeared that its cash flow was still okay,” said Sun Binbin, a bond analyst at China Merchants Securities Co. in Shanghai. “The default is having a bigger impact on the market than previous defaults this year.”

    More Chinese companies are struggling to repay debt amid the worst economic slowdown in a quarter century. Hua Chuang Securities Co. estimated the total amount of new debt being used to cover interest will be a record this year at 7.6 trillion yuan, up 5 percent from last year.

    The yield premium on Chinese five-year AA- rated corporate bonds over government notes has widened 10 basis points in November, set for the worst month since June, according to Chinabond data.

    Among the 43 issuers that canceled sales, about 65 percent are rated AA or lower. Thirteen issuers are in the coal, steel or cement industry. (SD-Agencies)