MNI POLICY: China Virus-Hit Firms Still Face Cash-Flow Issues

By Archie Zhang

     BEIJING (MNI) - Companies across China struggling with the coronavirus

fallout are finding it increasingly difficult to get financing support, despite

a raft of government policies to boost lending to firms, MNI has been told by

banks, firms and industry analysts.

     "Small companies and medium companies are not producing so they have

nothing to pledge to the banks to get loans," an investment associate with a

government-affiliated fund said, "the current policies will mostly benefit the

state-owned enterprises who have more assets to pledge."

     A survey conducted by Peking University and Tsinghua University showed a

third of almost 1,000 small companies questioned will run out cash within a

month and a further third have enough cash only to sustain them for two months

as much of the service sector grinds to a halt. 

     As of autumn 2019, 82% of companies' external financing comes from

financial intermediaries such as banks, according to Development Research Center

of the State Council, but banks are concerned with a pick-up in non-performing

loans although regulators are urging them to provide more financing to small

business.

     "The loan procedure has been shortened and agents can be sent to companies

to process paperwork. But the requirement for collateral has not been relaxed.

This part (collaterals) can't afford to have any problem," according to a person

in charge of granting credits at a national commercial bank.

     -COLLATERAL ISSUES

     More and more catering and restaurant companies heavily impacted by the

epidemic are coming to banks for loans, but they don't have the required

collateral, the person added, noting the action from local authorities has been

of limited help.

     Companies directly involved in containing the epidemic can easily access

capital, helped by skyrocketing demand for products such as facemasks. 

     Yaodu Bank, a local commercial bank in Anhui province, approved a loan in 2

days for a local company producing hand sanitizer gel, saving the company

CNY150,000 on a CNY5 million loan, according to documents provided by the

company to MNI.

     Farms have been under pressure since the outbreak started, with feed costs

soaring and availability of funds a problem, according to Wang Wenshen an

analyst with SCI99, a commodity intelligence company in Shandong, a major

agricultural centre.

     China's pig producers, hard hit by last year's African Swine Fever, have

struggled and rising pork prices have been a main driver of China's CPI, which

hit an 8-year high of 5.4% y/y in January.

     "The situation still depends on when the epidemic will end," Wang said,

underlining a general sentiment across the country. However, Wang predicted the

situation will ease as more factories resume operations in the coming days.

--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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