At least 63 million firms could close in the next three months. Hospitals and export firms also have a liquidity problem. Container traffic in Chinese ports has fallen by 20 per cent. The government has responded with expansionary measures that could however harm the banks.
Beijing (AsiaNews/Agencies) – China’s small and medium-sized firms are the most affected by the coronavirus outbreak, which has infected more than 45,000 people and killed more than a thousand.
The quarantine imposed by the authorities, which includes restrictions on movement within the country, has effectively stopped national production. Many companies are still closed or do not have enough staff for regular operations.
With economic growth expected to slow down to around 5 per cent, a percentage point less than in 2019, the 63 million “self-employed businesses” that form the backbone of the Chinese economy (60 per cent of production according to China’s National Bureau of Statistics) are likely to have short-term liquidity problems.
Unlike large state-owned enterprises their biggest problem is that they struggle to get bank loans at affordable rates.
Hospitals too have financial problems that prevent them from buying the quantity of protective masks, suits and coronavirus test kits they need.
Export companies face similar problems, as the business freeze is pushing customers to turn to competitors outside of China.
Container vessel calls at Chinese ports has fallen by 20 per cent since the outbreak of the crisis in mid-January, reports Alphaliner, which monitors global freight traffic.
Cargo ships already bound for China are calling at other ports in the region, particularly Busan, South Korea.
According to a joint study by Qinghua and Beijing universities, Chinese companies expect their earnings to be halved in 2020. This means that under the current conditions they will be able to survive three months at most.
The Chinese government has adopted expansionary measures to protect the economy from the negative effects of the outbreak.
China’s central bank, the People’s Bank of China (PBOC), is set to inject 300 billion yuan (US$ 43 billion) into the banking sector.
The PBOC also instructed lenders to roll over the loans of companies that have troubled repaying their debts as a result of the outbreak as well as lower interest rates on loans and allow for reasonable delays in repayments for mortgages and credit card debt.
Lending rates have been lowered and fees and taxes eliminated for companies that make urgently medical supplies.
On the long run, all this could place the banking sector under excessive stress, with significant liquidity losses. In this context, the production crisis could also turn into financial one.