Credit Crunch effects in China
May 6, 2009
The FT story makes the following key points:
– A rapid deterioration in the ability of Chinese companies to pay their suppliers “is significantly increasing the risk of doing business in China.”
– Chinese companies are facing “a liquidity crunch” due to China’s plummeting exports. “Many of them were also unable to access bank loans to tide them over the tough times, especially if they were small to medium-sized private businesses.”
– Though Chinese banks have “ample liquidity,” they usually do not lend to small private companies.
– Many Chinese companies have turned to their suppliers for credit, “thus forcing the pain up the supply chain.”
– Chinese suppliers are extending credit now more than a year ago. This is “bad credit management.” “Now is not the time to extend credit, it is time to restrict it.” “Most Chinese suppliers, however, have never experienced such a downturn.” “A lot of these companies never had to deal with the problem of not getting paid, because sales had always been increasing,” he said, “There’s not enough financial resource, not enough management.”
Tags: Export, business in china, USRelated Posts:
Hong Kong, Mainland to Connect Payment Network
April 4, 2009
Beginning March 16, Hong Kong and the rest of the mainland will link their foreign-currency payment and clearing systems to reduce cross-border payment risks and costs.
Mainland Chinese banks can now make cross-border payments and settlements in Hong Kong dollars, United States dollars, euros and pounds through the network.
More currencies will be accommodated depending on market demand. According to Shanghai Daily, the linkage will improve multi-currency payment efficiency while also facilitating capital turnover efficiency of participating banks.
Cross-border settlements will be carried out by the mainland banks; China Construction Bank, the Bank of China, the Industrial and Commercial Bank of China, and Shanghai Pudong Development Bank.
The Hong Kong agent banks for the mainland one will also be China Construction Bank, the Bank of China, the Industrial and Commercial Bank of China and Citibank.
Source: China Briefing
Tags: commercial bank of china, Cross-border, clearingRelated Posts:
