17 February 2020 - 19:37Poeple wearing protective face masks walk along a street in Shanghai on February 17 2020. Picture: AFP/NOEL CELIS
They face $944bn of debt maturities onshore and $90bn offshore in 2020. Authorities are going back to their old playbook of spewing handouts to get them through. The costs will add billions of dollars of debt and cripple an already-weakened financial system. It may be doing more harm than good.Workers are stranded and factories remain widely shut. There is no imminent sign of that changing, even if the increase in infections has trended downward in recent days.
Beijing’s latest round of financial forbearance will only worsen the situation. Lending more with looser terms may help tide over some companies and refinance their debt for now, but does little to flush out the ones that just aren’t financially viable. That many cannot support themselves without the state for even three months shows China’s vulnerabilities. Lenders, the pillars of the financial system, are weaker than the numbers betray. The central bank’s stress tests show as much.
A more prudent approach this time might be call into service insurance companies with huge balance sheets, and asset management companies, with their experience in dealing with stressed companies. Insurers have been big buyers of bonds, stocks and private equity deals for years. As operators in a marketplace, they understand credit risk better than banks. They could be more effective in managing small and medium companies’ debts.
Business Business Latest News, Business Business Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
How the coronavirus has infected China IncEconomic slowdown is likely to bite into earnings by 10% to 20% for months and hamper Chinese companies' ability to pay their debts
Source: BDliveSA - 🏆 12. / 63 Read more »