Millions of Chinese businesses … waiting to die

Brigita – Director of one of China’s largest car dealerships now has no choice. The company’s 100 stores were closed for a month by the COVID-19 epidemic, stockpiles were about to run out and banks were reluctant to extend the 1.2-month repayment period of debt on goods value. billion yuan. A few other creditors also urged money.

“If you cannot repay the debt, everything will be very bad,” said Brigita, owner of the company 10,000 employees.

A survey of Chinese small and medium-sized companies published this month showed that one-third of respondents said that they only had enough money to cover expenses in one month, and the rest said that they would run out of money within 2 months. .

While the Chinese government has cut interest rates, requiring banks to boost lending and loosen lending conditions for businesses to restore operations, many domestic private enterprises still say they cannot. access to what is needed to cover upcoming debts and employee salaries. Without additional financial support or the Chinese economy unexpectedly recovers, some businesses will surely have to close.

“If China fails to prevent the corona virus from spreading in the first quarter, I predict that a large number of small businesses will go bankrupt,” said Lv Changshun, an analyst.

Most small and medium enterprises say they will run out of money in the next few months.

Despite accounting for 60% of the economy and 80% of the country’s employment, Chinese private enterprises have had difficulty accessing capital to help them expand in crises for a long time.

President Xi Jinping last weekend pledged a greater focus on reviving the economy with pioneering financial policies, speeding up construction projects and easing reserves for commercial banks. trade to launch more capital.

Support from major Chinese banks to cope with the epidemic has been made somewhat, mostly to deal directly with the virus. Industrial and Commercial Bank of China (ICBC) – the nation’s largest lender, also decided to reduce interest rates to 5% for small businesses.

In an email interview with Bloomberg, ICBC said it had distributed 5.4 billion yuan ($ 770 million) to help companies cope with the corona virus. “We accept loan applications from small businesses as soon as they are received.”

In total, Chinese banks have provided about 794 billion yuan to lend in connection with virus prevention efforts since February 20. Foreign banks like Citigroup also cut interest rates. Such data means that Chinese small businesses face an interest payment of 36.9 trillion yuan each quarter.

Brigita’s company now borrows money from 12 banks, saying that only one deal has been reached with one unit to extend the loan repayment period to two months. Currently, the company still pays its employees.

Many Chinese businesses are already struggling before the corona virus arrives. The trade war brought economic growth to a three-decade low last year.

The biggest risk is with the restaurant and catering industry, tourism, aviation, hotels and commercial centers.

Yang, a manager of a seven-storey shopping center in Shanghai, said a customer who operates 150 regular hotel rooms full of rooms asked for a month’s rent after the business had trouble. Yang expected the situation to continue to worsen and called for help.

The deputy director of a company in Anhui province said that his company was even denied the loan under the current credit line. The fall in sales has severely damaged the company’s credit profile and the lack of new projects means the company cannot find additional sources of growth. Without a loan, businesses can live for 4 months or longer if some loans are postponed.

Banks themselves have difficulties. Many places fall short of capital. S&P has predicted that the current long-standing situation could cause a large bad debt ratio for the banking system, tripling to 6.3%, to 5.6 trillion yuan.

Vu Hai – owner of Mei KTV – a chain of 100 Karaoke shops in China publicly expressed their difficulties on WeChat.

KTV bars were closed under orders from the government, causing the cash flow to evaporate. Special loans will help, but the problem is that no bank lends without conditions.

Through WeChat, Wu said the company probably only has two months left to close!