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Millions of Chinese Firms Face Collapse If Banks Don’t Act Fast
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With much of China’s economy still idled as authorities try to contain an epidemic that has infected more than 75,000 people, millions of companies across the country are in a race against the clock to stay afloat.
Brigita, a director at one of China’s largest car dealers, is running out of options. Her firm’s 100 outlets have been closed for about a month because of the coronavirus, cash reserves are dwindling and banks are reluctant to extend deadlines on billions of yuan in debt coming due over the next few months. There are also other creditors to think about.
“If we can’t pay back the bonds, it will bad,” said Brigita, whose company has 10,000 employees and sells mid- to high-end car brands such as BMWs. She asked that only her first name be used and that her firm not be identified because she isn’t authorized to speak to the press.
A survey of small- and medium-sized Chinese companies conducted this month showed that a third of respondents only had enough cash to cover fixed expenses for a month, with another third running out within two months. While China’s government has cut interest rates, ordered banks to boost lending and loosened criteria for companies to restart operations, many of the nation’s private businesses say they’ve been unable to access the funding they need to meet upcoming deadlines for debt and salary payments. Without more financial support or a sudden rebound in China’s economy, some may have to shut for good. “If China fails to contain the virus in the first quarter, I expect a vast number of small businesses would go under,” said Lv Changshun, an analyst at Beijing Zhonghe Yingtai Managemen
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