SHANGHAI: A unit of China’s biggest state-owned machinery company may be unable to make interest payments on a bond, it said, as slowing growth heightens default risks among heavily-indebted firms.

China National Erzhong Group (CNEG), which makes metal smelting equipment, may miss an interest payment on a one billion yuan five-year bond issued in 2012, it said late Tuesday, without giving an amount.

Chinese authorities say they are trying to reform the lumbering, inefficient industrial giants of the state sector, but the process is slow and obstructed by vested interests.

CNEG is a subsidiary of China National Machinery Industry Corporation, China’s biggest state-owned machinery company and one of around 110 major state-owned firms under the direct central government management.