China’s undead army of zombie corporations will not qualify for debt-for-equity swaps, the government said, as Beijing tries to curb the risks of ballooning corporate debt.
New guidelines posted on the Chinese State Council’s Web site sought to offer some clarity to long-discussed, but hazy plans to reduce debt by letting lenders swap bad loans for shares in some debtor companies.
The policy would offer the swaps using market-determined values to help “high-quality” firms with long-term growth prospects overcome “temporary setbacks,” while barring “zombie companies” and those with poor credit ratings, the document said.
It called for mergers and acquisitions of debt-choked companies to improve competitiveness and reduce leverage.
China’s Communist authorities have repeatedly pledged to give market forces a greater role in the world’s second-largest economy, where growth is slowing and lumbering industrial firms, many of them state-owned, remain a drag.
The guidelines, posted on Monday, came as analysts have sounded alarm bells over risks of a blowout in the economy, with total debt surging 465 percent over the past decade, and corporate debt leaping to 165 percent of GDP last year, according to Bloomberg News.
If corporate borrowing growth does not slow, the ratio of sour loans could triple to 17 percent by 2020, S&P Global Ratings said in a report yesterday, adding: “We believe that the current growth rate of China’s debt is not sustainable for long.”
Economists have warned that the ballooning borrowing risks sparking a financial crisis as bad loans and bond defaults increase.
On Monday, bankruptcy proceedings for massive state-owned Dongbei Special Steel Group (東北特殊鋼集團) were approved, according to Xinhua news agency.
The 111-year-old company had defaulted on debt payments nine times in a row and now owed several billion yuan, it added.
Analysts with Nomura said they “expect more defaults and even bankruptcies further down the road,” and warned that “a rising default rate is inevitable,” driving the government to shoulder responsibility for bad company loans.
China’s total debt hit 168.48 trillion yuan (US$25.1 trillion) at the end of last year, equivalent to 249 percent of national GDP, top government think tank China Academy of Social Sciences has estimated.
Last month, the Bank for International Settlements — dubbed the central bank of central banks — said one gauge of Chinese debt had hit a record high in the first quarter of the year and warned it could face a financial crisis in the next three years.
However, at a forum in Macau yesterday, Chinese Premier Li Keqiang (李克強) said the country’s debt risks were “generally controllable,” Bloomberg News reported.
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”
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Sales in the retail, and food and beverage sectors last month continued to rise, increasing 0.7 percent and 13.6 percent respectively from a year earlier, setting record highs for the month of March, the Ministry of Economic Affairs said yesterday. Sales in the wholesale sector also grew last month by 4.6 annually, mainly due to the business opportunities for emerging applications related to artificial intelligence (AI) and high-performance computing technologies, the ministry said in a report. The ministry forecast that retail, and food and beverage sales this month would retain their growth momentum as the former would benefit from Tomb Sweeping Day