Xiao Jiashou, knowns as "steel-trading king" who was rumored to have fled the country over debts of 3 billion yuan (US$492 million), says he is still negotiating with the banks, China Central Television (CCTV) reported yesterday.

Xiao, chairman of the Shanghai Songjiang Steel Market, one of the biggest of its kind in China, didn't attend court hearings over financial disputes with several banks on February 10, triggering speculation he may have gone abroad.

However, Xiao told CCTV by phone that he is still in Shanghai and in talks with the banks, but declined further comment.

Ye Zhaohua, vice general manager of the company, said Xiao wasn't in court as it had postponed proceedings due to the absence of most defendants.

Xiao is facing 36 lawsuits filed by the China Minsheng Banking Corp, Ping An Bank Co Ltd and the Industrial and Commercial Bank of China, according the Shanghai Pudong New Area People's Court website. All the cases are related to disputes over loan contracts.

Chinese banks have rushed to recover loans to the steel industry as default risks are building in a time when steel makers and traders are dogged by crippling overcapacity, mounting debts and dismal market demand.

By last August, executives at more than 20 steel trading enterprises in Shanghai had been brought before the court by banks chasing loans, CCTV reported. However, some traders said they didn't initially borrow the money and could not repay it.

Ye told CCTV that in 70 percent of the lawsuits filed against Xiao, he was not the direct debtor but a credit warrantor for other steel merchants.

It's common in the industry for large steel traders to guarantee the loans of smaller firms that have difficulties in borrowing cash, according to CCTV. When small firms default, credit warrantors have to repay the loans.

"We're just about at the end of our rope. We can't afford the loans," Ye told CCTV.

On January 30, the Pudong court froze a 31.1 percent stake, worth 466 million yuan, in Shanghai Xinri Equity held by Xiao as a result of a loan dispute with the Minsheng Banking Corp.

Figures from the China Iron and Steel Association showed debts in China's 86 largest steel firms amounted to 3 trillion yuan by the end of June last year.

The China Banking Regulatory Commission warned about excessive loans to steel traders in 2012. Some traders were reported to have fled the country or committed suicide after lenders tightened credit.

There are signs the default crisis is extending to other industries.

A high-yielding 3 billion yuan trust product issued by China Credit Trust Co and distributed by ICBC was on the verge of default last month. The product was created to finance a coal mining firm in north China's Shanxi Province that collapsed in 2012.

An agreement was reached to allow investors to recover their principal investment.