China’s Debt Crisis

#China may be forced to continue to increase its debt position. Their cash flow future looks grim.

China’s debt is largely held by corporations. The problem is a fair number of their small and large companies are poorly managed. Their inefficient equipment and systems results in high-cost, money-losing operating companies. This results in deficit cash flows which severely limits the capital available for the repayment of debt.

China is reportedly attempting to have lenders restructure weak loans into equity. The majority of the lenders are banks. Banks will be converting their loans into equity in a number of financially distressed companies which may negatively affect a bank’s financial condition.

Will the current tariff challenge affect corporate revenue and further increase operating losses?

As a consequence China may need to increase its debt to support companies incapable of repayment or restructuring.

#TurnaroundCEO

Debt Articles:

Forbes

South China Morning Post

China Power

Bloomberg

Tariff Articles:

Bloomberg

Politico

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