INVESTORS are balking at bonds sold by companies in China’s province most vulnerable to financial risks, amid concerns the government is cutting support for troubled firms.

    Right Way Real Estate Development Co., a developer based in the city of Dalian in the northeastern province of Liaoning, sold five-year AA rated notes at a yield of 7 percent Tuesday last week. That was 289 basis points higher than the average on similar-maturity securities nationwide. Xinmin City Luxin Municipal Engineering Co., a local government financing vehicle also based in Liaoning, issued seven-year AA rated debentures at 6.41 percent in the same month, 206 basis points higher than the market yield.

    Premier Li Keqiang is seeking to weed out zombie State-owned firms as China’s economy grew at the slowest pace in a quarter century. Chinese investors, who had been used to government bailouts, have seen a total of 17 onshore bond defaults nationwide this year, compared with seven in 2015, as authorities allow market forces to play a bigger role.

    “Slow growth and limited tax resources mean there’s limited scope to cushion the blow from necessary reforms to a creaking State-owned industrial base,” said Tom Orlik, chief Asia economist at Bloomberg Intelligence in Beijing. “Provinces like Liaoning, which face a combination of weak growth, high debt, and a stagnant population, face growing challenges.”

    (SD-Agencies)