Huaikuang Modern Logistics Co, a Chinese steel trading company, said it defaulted on borrowings, highlighting concerns that non-payment problems would spread as the nation's economy slows.

Anhui Wanjiang Logistics Group, based in the city of Wuhu, disclosed the unit's default in a statement to the Shanghai Stock Exchange on Tuesday, without giving any more details. The company cited banks' unwillingness to extend loans to the steel industry as the reason for the nonpayment.

Chinese steel traders are grappling with loan repayments after prices for the metal in the country slid 27 percent this year as the slumping property market exacerbates industry overcapacity.

"The financial problem is really big in the steel industry," said Li Ning, a bond analyst at Haitong Securities Co, the nation's second-biggest brokerage. "Maybe this is just the beginning, and it could get worse."

Shanghai Chaori Solar Energy Science &Technology Co marked China's first onshore corporate bond default in March when it missed a coupon payment. Chinese firms have the most debt globally after increasing borrowings to $14.2 trillion as of Dec 31, surpassing the US' $13.1 trillion, Standard &Poor's said in a June report.

Concerns have increased that defaults may spread as the world's second-largest economy cools. Policymakers have set a 7.5 percent growth target for 2014, which would be the slowest since 1990. Credit-default swap contracts insuring the nation's debt against non-payment have climbed 12.8 basis points this month to 81.5 basis points, prices from data provider CMA show.

Huaikuang Modern Logistics has outstanding debt of 14.7 billion yuan ($2.4 billion), Anhui Wanjiang said in the filing. Liu Yibiao, chairman of the unit, and Wang Jing, chief accountant, have been detained on suspicion of dereliction of duty, it said.

Anhui Wanjiang itself has a 1.5 billion yuan bond due in 2018 that it sold last year, according to data compiled by Bloomberg.

The steel and steel-trading industries have been slumping since 2012 because of overcapacity problems, Anhui Wanjiang said in the statement. Huaikuang Modern Logistics has had difficulties getting cash back from its steel clients since April, according to the statement.

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