“Investors are getting skittish about the defaults, fearing that more will come in the next few months,” said Wang Feng, chairman of Ye Lang Capital, a financial services company based in Shanghai. “The financial regulators are standing firm in deleveraging the economy, and it is certain that dozens of debt-ridden corporate borrowers grappling with the cash squeeze will have difficulties in repaying loans.”

Nonetheless, some analysts and business executives contend that any panic at this stage is premature.

“It is just a matter of time before fears about a crisis will ease,” said Wan Qin, a Shanghai-based entrepreneur in the laundry business. “It is a difficult time now, but it’s a far cry from a crisis.”

Gao Ting, head of China strategy at UBS Securities, said the defaults only represented a small portion of the country’s gargantuan corporate debt market, which is valued at US$2.8 trillion.

“No high risks have been seen yet,” he said. “The defaults are not likely to have an impact on the overall market.”

According to data provider Wind Information, 12 listed companies have defaulted on repayments for 20 bonds worth a combined 16 billion yuan (US$2.5 billion) in 2018. That includes a 2 billion yuan bill sold by a principal unit of freewheeling asset buyer CEFC China Energy.

The debt woes are expected to deepen as bonds worth about 20 trillion yuan expire within the next 12 months, Wind said.

As the central bank keeps tightening liquidity, it is likely that some of the corporate borrowers, unable to access new financing, will fail to repay the principals and interest.

China’s debts at the end of last year’s second quarter represented 268 per cent of the country’s economic output, according to a JP Morgan report.

Unlike in western financial markets where bond defaults are nothing unusual, repayment failures in China are often viewed as a potential cause of social unrest.

It was not until March 2014 that China’s bond market saw its first default when Shanghai Chaori Solar Energy Science & Technology failed to make an interest payment.

Prior to that, the authorities would step in to bail out struggling corporate borrowers with cash injections or restructuring plans to ensure repayments would be made.

In a stark illustration of how things have change, in the last weeks alone two companies announced they had missed payments. On Monday, state-owned China Energy Reserve & Chemicals Group said it had failed to repay a US$350 million bond, owing to the tighter credit conditions.

And Shanghai Dasheng Agriculture Finance Technology announced on Tuesday that two of its units had defaulted on loan repayments to the Bank of Shanghai, valued at 89.9 million yuan.

“It is not unusual for businesses with a high leverage ratio to find themselves vulnerable to credit tightening,” said Wang. “But limited access to new funding can easily spoil healthy businesses.”

It is not the first time that confidence in China’s markets has been dented by a rash of company defaults.

Between late 2015 and mid-2016, dozens of corporate borrowers failed to repay debts when the central bank stepped up its efforts to curb liquidity, triggering a crisis of sentiment in the mainland’s financial sector.

“Psychologically, a rising number of defaults hurts investors’ confidence,” said Yin Ran, a Shanghai-based angel investor who also buys bonds and equities. “To be fair, the number of defaults and the severity of the debt problem exposed so far are in line with market expectations. The worst has yet to come, but there’s no need to be overly worried.”

S&P Global Ratings said in January that China is likely to see its first bond default by a local government this year as the deleveraging efforts by Beijing continue.

“China’s financial markets are not fully driven by market forces,” said Ding Haifeng, a consultant with Integrity Financial Consulting. “Bond defaults can come in droves due to monetary tightening. But the governments are still stability-minded and they wouldn’t want to see defaults widespread in the economy.”