2014-04-20

Rumored Mass Death of Companies in Xiaoshan District of Hangzhou If Banks Collect on Debts; Government Tells Banks to Sit Tight or Leave

Google translates part of this article as "mutual insurance companies," but this is incorrect. What it actually means is these companies are tied together because they have given each other loans in the past to bail people out, or they are tied together by mutual investments and projects. What was a hodgepodge of individual bankruptcies has turned into a systematic crisis in this small district because there is no one left to save them. The banks are concerned about risk and may call in loans, taking the stronger companies down with the weak. The government told the banks, if you pull the loans then you ought to leave town. Some think the problem is overblown.

My take: the debtors have reason to scream loudly and inflate the situation in the hopes of receiving aid (See 2008 TARP bailout), but this region was already cracking in 2011 when Wenzhou factory owners were running away from debts. Add in a couple more years of debt and overcapacity......

Xiaoshan Hundreds of Strong Companies May Go Bust Due to Mutual Aid; Government Forbids Banks From Pulling Credit (萧山百强企业因互保或批量死亡 政府禁银行抽贷)

Rumored Mass Death of Companies in Xiaoshan; If Banks Don't Collect They Won't Die (传萧山大企业将批量死亡 知情人称银行不收贷就不会死)
Hundred companies or mass death rumors, again affecting the outside world attention on the economic stronghold of Xiaoshan District, Hangzhou Economic and maybe the riskiest area in all of China.

Earlier media reports said, many large enterprises in Zhejiang "mass death", similar to private enterprises in Xiaoshan city become such a "credit danger zone."

"First Financial Daily" reporter found that some companies appear Xiaoshan financial difficulties related causes and mutual insurance companies. Informed sources told reporters that some mutual insurance companies to go wrong, there is the risk of bank loans went to see the closing credits, in fact, "they are their own business is good, if the banks do not charge will not die."

"Xiaoshan economic fundamentals are good, but the individual enterprise of individual sectors is a problem, there is a risk." Xiaoshan District guard against and defuse the risk of corporate capital chain Leading Group Office (hereinafter referred to as "defuse Xiaoshan District Office"), director Li Rujiang the reporter said, through various measures, now Xiaoshan private mutual insurance chain, capital chain has been basically stable, but risks remain, the government, banks, enterprises tripartite effort.

Enterprise into mutual dilemma

Since 2012, the collapse of private enterprises in Xiaoshan news came one after another, in mutual infection, banks received loans under some backbone significant private capital chain tight, are facing enormous death in the face.

"Risk enterprises are mainly concentrated in the textile fiber and steel two industries." Li Rujiang said individual feather business risk, auto parts has been no danger, chemical and other industries is still relatively stable.

As the main "back garden" Hangzhou manufacturing, textile and chemical fiber has formed the current Xiaoshan, mechanical auto parts, clothing feather, steel grid, fine chemicals and high-tech industries such as the six bases, covering Vientiane, Asia electromechanical heavyweight Zhejiang Province manufacturing enterprises.

Xiaoshan largest textile and chemical fiber industry. Two years ago, a Xiaoshan chemical business failures, affecting the mutual insurance companies build Jie fiber, thus involving five mutual insurance companies, mutual insurance companies first lap 6 involving bank loans of more than 30 billion yuan.

"After the (construction kit fiber) liquidation, mutual insurance companies want to be in debt, back or get back together, there is no question of survival, but a key premise is that banks do not receive their loans." 李如江 said, "I'm afraid Afraid bank loans received, and now we analyze, there may be two companies at risk, three companies is not the problem. "

In addition to textiles, steel industry is another pillar of Xiaoshan, production has occupied 30% of the national market, but now it has become a dangerous condition in Xiaoshan companies hardest hit.

Informed sources told the "First Financial Daily" reporters, a company called CITIC Steel companies have closed down, four involving mutual insurance companies, loans 12 billion. "Now the first lap four companies also support the key is not to go to the bank to close the loan, the second lap mutual insurance companies now have no problem."

The sources said, in addition to the closure affected by natural steel, and now there is a steel enterprise in Xiaoshan more dangerous. "Back over 200 million yuan of debt, bank loan of 200 million yuan and pumping, now this enterprise has financial pressure." He said, "Originally this business conditions are good, exports more than 50 countries a year sales of 1.5 billion yuan, 1.5 billion yuan in gross profit. "

According to the reporter learned that some of the dangerous condition of the enterprise in Xiaoshan, not due to their own mismanagement, more risk from mutual insurance. "Most companies are banking on the Xiaoshan sense of crisis." Branch of a commercial bank Xiaoshan who told reporters that if the banks do not charge pump-prime loans, and that the problem is not the survival of the enterprise, and now there are signs of trouble fear guarantee. "Banks will give companies a transition period, if the hematopoietic insufficiency, companies will eventually have to go wrong."

李如江 said first lap in Xiaoshan mutual insurance companies, in addition to built-chemical fiber, CITIC Steel two companies implicated hundred enterprises have seven, including five furniture financial pressure; mutual insurance companies in the second lap , the implicated twelve three hundred companies. "Currently, mutual insurance companies first lap condition is still good, but the premise is not to close their bank loans."

The source also said some of the mutual business problems, and bank loans have a look at the risks in a hurry to close the loan related. Then, the risk of the first lap mutual insurance companies, on the second lap, third lap mutual insurance companies spread. More noteworthy is that, under the influence of mutual chain, manufacturing companies spread the risk to agriculture, services. From the entire surface of the watch, has become a regional economic risks Xiaoshan, not just the problem of industrial enterprises. "


Although many companies because it involves mutual encounter financial difficulties, Li Rujiang still told reporters that the existence of the risk of individual companies, but Xiaoshan "hundred enterprises mass death, that is not true."

Boost the expansion of the bank under

Assistant to the chairman of a steel industry group Xiaoshan "First Financial Daily" reporters that the current Xiaoshan more capital-intensive enterprises, mutual insurance companies are more in demand for bank loans is relatively large. Once the capital chain risk appears mutual insurance companies will influence each other, prone to regional economic problems.

The reason for the above-mentioned assistant chairman, told reporters: "Now individual enterprises danger, is overextended by the company, the global market downturn, banks received loans and other multi-pump-prime reason for the attack caused."

Xiaoshan developed private economy, industry sales of up to 550 billion yuan last year, the minimum sales shortlisted hundred companies are more than 500 million yuan. To speed up the adjustment of economic structure, Xiaoshan encourage enterprises to diversify, aims to nurture large enterprises. However, in the "4 trillion" stimulus, some of the rapid expansion of production capacity in Xiaoshan companies.

"At least Enterprises 1/3 of the investment behavior of some business owners have a business matter, engage in sideline.." 李如江 said many owners use as a financing platform for companies to increase production capacity expansion, investment in real estate and other industries; the other hand, lack of diversification of investment and financing channels, the sources of funding more dependent on bank loans, the debt ratio rising, "matchmaker" type of mutual chain rapid expansion, making the decline in the quality of corporate assets, life cycles.

For example, there is a chemical fiber enterprises in Xiaoshan, 2010 to Anhui to buy 400 acres of land, five or six billion investment to increase capacity expansion of chemical fiber products. "It was still good chemical fiber industry, but the year before last fiber of overcapacity, resulting in poor sales of the company coupled with the company has 16 mutual insurance companies, mutual insurance companies a few problems down the bank of the enterprise pumping loan of 280 million yuan. "

Many local people were interviewed by reporters, said the bank behind this undoubtedly played a major role in pushing hands.

"A few years ago, the bank credit policy is too loose, then banks 'send money' to the enterprise, government officials also need to do ideological work, because the banks have to lend assessment indicators." There are people who understand the financial circumstances of Xiaoshan said.

But now, some of the company's most worried about is the Xiaoshan bank loans drawn closing credits, often involving a number of companies and bank loans. "Banks are looking at who should receive, the recipient will not, and also panic." These people said.

CE Industry Leader, told reporters that before the consequences caused by irrational investment must be someone to bear. Originally industry profits is not high, many companies invested in real estate, had wanted three to five years will be able to recover the money, I did not expect so soon caught in a regulation.

Bank loans received government warnings

This year the first lunar month, Xiaoshan Xiaoshan District was established to resolve to do, to deploy more than 20 district-level departments centralized office personnel, representatives of the district government the sole disposal of venture capital chain problems.

February 14, Xiaoshan District Office, Qufu Ban issued "Opinions on resolving the problem of venture capital chain (Trial)" notice, the first basic principle is to adhere to the "market economy", calling for "insisted the fittest, classification guidance, block the disposal of well-run enterprises to encourage the development of temporary difficulties for enterprises to actively support, for serious excess capacity, could not rescue the enterprises to actively bankruptcy liquidation. "

"For example, chemical fiber industry, serious excess capacity, companies die, we will not be saved. Against steel industry, our principle is to eliminate one, save one." Li Rujiang that do not conform to industry-oriented, backward production capacity and pollution businesses, Xiaoshan clearly stated, "To take the opportunity to be eliminated."

For this purpose, on the basis of such notice Xiaoshan, also introduced four supporting documents, including the introduction of industrial land guidance, along with industrial land mortgage guidance. "Guide price of industrial land, help to increase the value of collateral. As a result, a little less corporate guarantee loans, mortgages a bit more, which is the most critical link in Xiaoshan cut guaranteed way." 李如江 said.

At the same time, banks are actively cooperate and become the key to unlock the money chain.

"Now the government meeting, told banks not to pull the loans, whomever pulls the loans will be reported. If you continue pulling the loans, then Xiaoshan does not want you, you will not develop here." An Xiaoshan District Office to resolve the main leader, told reporters that the continued pumping of bank lending, the bank's presence in Xiaoshan will withdraw deposits, pension funds and so on. This reporter has learned that some of Hangzhou bankers this "tough approach" complained.

For the current critical situation in Zhejiang enterprises facing the Yangtze River Delta area studies expert, Professor Chen Jianjun, Zhejiang University, believes that before the dangerous condition of the traditional local increase efforts to support enterprises, as well as "4 trillion" economic stimulus policy, is that the next crisis postponed But industrial restructuring has not been fundamentally resolved.

"Cannot rely on stimulus." Financial Research Institute, Zhejiang University School of Economics professor said the reporter王维安Wenzhou market started early, the problem came out too early, and now the traditional enterprise risk from Wenzhou spread to the whole Province, this situation will spread to the Midwest, but their situation unlike the eastern region so serious. Pour down the dangerous condition of the enterprise, the rescue of the rescue, the government can not blindly have to save, "friendly fire high-tech enterprises must save." Chen Jianjun believes in minimizing the social pains, regional economic shocks, the government should really face Reality accelerate corporate restructuring and upgrading, large-scale training of industrial workers, the development of equipment manufacturing and other new industries.

1 comment:

  1. The joys of fiat currency that allows nonsense debt schemes like this to continue ad infinitum,

    ReplyDelete