Corporate bankruptcies in China are set to rise by about 50 per cent over the next two years, according to trade credit insurance provider Euler Hermes.
Corporate insolvencies will increase by 25 per cent this year and another 20 per cent next year, the firm said in a research report.
Sectors at risk include construction, metals and mining, low-end manufacturing and export-related industries.
The construction sector, in particular, is struggling with downward price pressures, large overcapacity and weak demand prospects, the report said.
A private survey of China's factory sector out yesterday showed more contraction than expected, raising fears of a sharper slowdown in the world's second-largest economy.
The preliminary Caixin China manufacturing purchasing managers' index fell to 47.0 this month, the worst since March 2009 and below market expectations of 47.5 and last month's final 47.3. Levels below 50 signify a contraction.
Euler Hermes economists Mahamoud Islam and Ludovic Subran expect the Chinese economy to expand 6.8 per cent this year and 6.5 per cent next year.
China's official growth target is around 7 per cent.