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The number of corporate defaults globally decreases - Dun & Bradstreet

20 September 2016

The number of corporate bankruptcies in the world, especially in developed countries, is reduced due to the stabilization of situation in the global economy, as well as preserving the company access to "cheap" money, according to the Dun & Bradstreet report for 2015 and the 1st half of 2016.

The number of corporate bankruptcies in the world, especially in developed countries, is reduced due to the stabilization of situation in the global economy, as well as preserving the company access to "cheap" money, according to the Dun & Bradstreet report for 2015 and the 1st half of 2016.

In particular, unspectacular but consistent domestic demand, a solid job market, and low interest rates have supported the US companies. The number of bankruptcies in the country declined in 2015 by almost 14% compared to 2014 year.

Germany’s bankruptcy rate is also falling, albeit at a slower pace (-4% in 2015). For Japan, which demonstrated record-low failure rates, dropped by 10% last year, the key factors were low energy costs, low and declining borrowing costs, and banks’ willingness to reschedule loans.

In many Asian countries, the number of bankruptcies is increasing due to lower commodity prices and falling demand for import from China, the report said. In particular, this trend is reflected in the number of defaults in Hong Kong, which has almost doubled, Vietnam (an increase by 44%) and Australia (16%).

China reveals perhaps a turning point. After the positive 2015 with 32% decrease in the number of bankrupt firms the value has increased by 27% in 1H 2016 vs 1H2015.

D&B expects three largest economies may evolve differently. In particular, the bankruptcy numbers in the US and Germany will continue to decline. Japanese exporters have to face the consequences of the strong yen, which will affect the level of export sales.

With regard to the absolute figures, the United States, where act nearly 30 million companies, leads the world in the number of corporate faults of a range from 25 thousand to 35 thousand per month. The comparable figure for Hong Kong amounted to 3.9-16 thousand, Vietnam - 3-13 thousand. In parallel, in Russia with more than 4 million of acting commercial organizations the number of bankruptcies per month varies from 700 to 1600, in the UK – from 3400 to 4100, France – from 1900 to 6500, Germany – from 1700 to 2200, Turkey – from 600 to 2100, Belgium – from 350 to 1000, Japan – from 600 to 800.

At the same time in China with its 70 million of legal entities, the figure is only 30-250 per month, which roughly corresponds to the level of Belarus and Kazakhstan.

Regulation of insolvency varies in different countries of the world. This affects the absolute figures on the number of applicable bankruptcy proceedings, Alexei Yuhnin, director of the Center for bankruptcy problems, said to Interfax. In this regard, dynamics is more indicative rather than absolute numbers, he said.

Current changes in legislation also impact on the dynamics. For instance, up to 30 September 2015 Russia’s statistics on the number of bankruptcy decisions included data on both companies and individual entrepreneurs. On October 1, 2015 private entrepreneurs are counted together with individuals, A.Yuhnin said.

American Dun & Bradstreet, established in 1841, is the best known in the world source of data on businesses and the associated credit risks.

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