Archive for ‘Société Générale’

  |  
07/04/2020

Coronavirus: nearly half a million Chinese companies close in first quarter as pandemic batters economy

  • Some 460,000 Chinese firms shut in the first quarter amid fallout from the coronavirus
  • Registration of new firms between January and March fell 29 per cent from a year earlier
Many Chinese businesses are struggling from the economic fallout of the coronavirus. Photo: Reuters
Many Chinese businesses are struggling from the economic fallout of the coronavirus. Photo: Reuters

More than 460,000 Chinese firms closed permanently in the first quarter as the coronavirus pandemic pummeled the world’s second largest economy, with more than half of them having operated for under three years, corporate registration data shows.

The closures comprised of businesses whose operating licenses had been revoked, as well as those who had terminated operations themselves, and included 26,000 in the export sector, according to Tianyancha, a commercial database that compiles public records.

At the same time, the pace of new firms being established slowed significantly. From January to March, around 3.2 million businesses were set up, a 29 per cent drop from a year earlier.

Most of these new companies were in traditional centres of economic power, such as Guangdong province in southern China, and close to half of them were in distribution or retail.

Coronavirus: Is the gig economy dead, and should the self-employed worry?
The number of business closures underlines the challenges facing China as it tries to revive its economy, which is at risk of a contraction in the first quarter for the first time since 1976.
“China has managed to get the Covid-19 outbreak largely under control and domestic supply disruptions have now mostly dissipated,” Yao Wei and Michelle Lam, economists from French bank Societe Generale, said in a recent note.

“However, there are signs of lasting damage to domestic demand, and on top of that the external shock resulting from widespread lockdowns in other major economies is arriving fast and furious.”

In Dongguan, a once thriving industrial hub in the Pearl River Delta, rows of empty shops and closed factories are becoming a noticeable feature of the landscape as companies grapple with slumping international demand.
Coronavirus: Chinese companies cut salaries and staff in industries hit hardest by Covid-19
In March, a local export-oriented manufacturer of tote bags and toys in the city, Dongguan Fantastic Toy Company, collapsed after overseas orders dried up, leaving some workers with unpaid salaries, the local labour authority said last month. The government has ordered the factory’s landlord to pay the outstanding wages.

Chinese business owners who can no longer afford to maintain operations face a number of hurdles before they can walk away from a company.

If an insolvent firm wants to cancel its company registration, it needs to go through bankruptcy procedures or show a liquidation report confirming it had no unpaid debt or other obligations.

Once shareholders or creditors file for bankruptcy, it can take months for courts to accept the case, followed by a long process of verification, creditors’ meetings and asset sales, said Li Haifeng, a partner at Baker McKenzie FenXun.

A new phase of coronavirus blame game: what is the legacy of Covid-19 on global supply chains?
“I expect a surge shortly after the situation settles down. We know many enterprises are already on the verge of bankruptcy. It’s just that they don’t have to declare or file for bankruptcy immediately,” Li said, adding he had received many queries on the matter in recent months.
Given the costly nature of bankruptcy proceedings, particularly for small businesses
 struggling with cash flow or without sufficient assets, the number of bankruptcy filings this year would not be high, said Zhu Bao, a Beijing-based lawyer.
Fears over a growing number of companies going bust also appears to have played some part in Chinese courts rejecting and delaying bankruptcy filings, according to lawyers and official documents.
Creditors who filed on behalf of suppliers that helped contain the coronavirus or companies on the brink of bankruptcy as a direct result of the pandemic usually had their claims knocked back, dozens of court documents filed over the past two months showed.

We know many enterprises are already on the verge of bankruptcy. It’s just that they don’t have to declare or file for bankruptcy immediately – Li Haifeng

The courts in these cases encouraged the creditors to reconcile with the struggling firms and ride out the difficulties.
This – along with disruptions to court proceedings due to virus lockdowns – helped slow the review of bankruptcies in Chinese courts to 1,770 in February and March, from 2,160 filings in January, according to the national enterprise bankruptcy information disclosure platform.
“The delay and rejection of taking corporate bankruptcy cases is certainly intended to keep the economy going. Too many bankruptcies cases do not do much to help economic recovery,” Zhu said.
China’s central leadership has maintained it wants to hit economic targets for this year, even as the country braces for a possible second wave virus outbreak.

The delay and rejection of taking corporate bankruptcy cases is certainly intended to keep the economy going – Zhu Bao

The odds of a first quarter economic contraction for China are growing, however, and economists are debating whether it still makes sense for Beijing to set a specific gross domestic product (GDP) growth target for 2020.

Ma Jun, an academic member of the People’s Bank of China’s monetary policy committee, is one prominent voice that has suggested Beijing drop a set target amid the uncertainty caused by the virus outbreak.

However, others like Yu Yongding, an economist from Chinese Academy of Social Sciences, said it was necessary to anchor the country’s economic expansion, though the government should be realistic about the goal, reported the Beijing-based financial media group Caixin.

Source: SCMP

Posted in Baker McKenzie FenXun, bankruptcy proceedings, batters, Caixin, Chinese Academy of Social Science, Chinese businesses, Chinese companies, Chinese courts, Chinese firms, close, closed factories, closed permanently, coronavirus, Coronavirus pandemic, cut salaries, Dongguan Fantastic Toy Company, economic fallout, economy, empty shops, fallout, gross domestic product (GDP), Guangdong, half a million, industrial hub, international demand, monetary policy committee, pandemic, Pearl River Delta, People’s Bank of China’s, registration, second largest economy, shut, slumping, Société Générale, staff, tote bags, toys, Uncategorized, virus outbreak, world’s | Leave a Comment »

12/02/2019

Trade talk hopes and shutdown deal buoy stocks

LONDON (Reuters) – World shares and bond yields rode a renewed surge in risk appetite on Tuesday, as investors were optimistic about U.S.-China trade talks and cheered Washington’s deal to avoid another government shutdown.

Tokyo’s Nikkei set the tone with its best day of the year so far and Europe wasted little time in trying to lift the STOXX 600 back to the two-month high it set last week.

Germany’s DAX jumped more than 1.2 percent, after rising 1 percent on Monday, and Paris and Milan were up 0.8 percent, while London’s FTSE approached a four-month peak despite ongoing Brexit uncertainty.

The dollar hovered at a two-month high and the Australian dollar also gained. The yen and Swiss franc dipped while U.S. Treasury and German bund yields edged up as investors jettisoned safe havens.

“We have had two bits of relatively good news overnight – optimism about the U.S. shutdown not resuming and optimism about a trade deal,” said Societe Generale strategist Kit Juckes.

“Equities are higher, bond yields are a little bit higher, yen and Swiss franc weakest overnight of the major currencies so it’s sort of risk-on rules OK!”

Juckes said he reckoned there was now a 75 percent chance that a ratcheting up of U.S. tariffs on Chinese goods at the start of March will be avoided and a 95 percent chance that another U.S. government shutdown will be dodged.

Those odds got a boost on Monday after U.S. lawmakers reached a tentative deal on border security funding, though aides cautioned that it did not contain the $5.7 billion President Donald Trump wants to build a wall on the Mexican border.

S&P 500 e-mini futures were up nearly 0.5 percent, pointing to a solid start on Wall Street later after a choppy day on Monday.

U.S. and Chinese officials expressed hopes the new round of talks, which began in Beijing on Monday, would bring them closer to easing their months-long trade war.

Beijing and Washington are trying to hammer out a deal before a March 1 deadline, without which U.S. tariffs on $200 billion worth of Chinese imports are scheduled to increase to 25 percent from 10 percent.

“There will be no winner in a trade war. So at some point they will likely strike a deal,” said Mutsumi Kagawa, chief global strategist at Rakuten Securities in Tokyo.

BIG IN JAPAN

MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.3 percent.

Shanghai rose 0.35 percent, South Korea’s KOSPI climbed 0.6 percent and Australian shares gained 0.3 percent.

The Nikkei rallied though, shooting up 2.6 percent after closing on Friday at its lowest level since early January. The Tokyo market was closed on Monday.

With the yen backtracking again, shares of exporters such as automakers and machinery makers led the charge. Separately, Deutsche Bank noted it was 20 years since Japan cut interest rates to zero, something now standard in large parts of Europe.

The dollar held firm, having gained for eight straight sessions against a basket of six major currencies until Monday, its longest rally in two years.

Although the Federal Reserve’s dovish turn dented the dollar earlier this month, some analysts noted the U.S. currency still has the highest yield among major peers and that the Fed continues to shrink its balance sheet.

Wall St wavers as investors eye trade talks, growth fears

“The dollar is the market’s pet currency at present regardless of whether concerns about the global economy are on the rise,” currency strategists at Commerzbank said in a note.

The dollar popped up to a six-week high of 110.65 yen. In contrast, the euro dropped to as low as $1.1267, its weakest in 2-1/2 months, and last traded at $1.1277.

In commodity markets, oil prices also ticked up as traders weighed support from OPEC-led supply restraint and a slowdown in the global economy.

U.S. crude futures traded at $52.68 per barrel, up 0.5 percent. Brent crude rose 0.6 percent to $61.89 per barrel. Gold was a touch stronger at $1,312 an ounce.

Source: Reuters

Posted in barrel, Beijing, Brent Crude, buoy stocks, China alert, Federal Reserve, Kit Juckes, KOSPI, Mutsumi Kagawa, Nikkei, OPEC, Rakuten Securities, shutdown deal, Société Générale, South Korea, strategist, Tokyo, trade talks, Uncategorized, US crude, Wall Street, Washington | Leave a Comment »

  |  
CCChang

Law of Unintended Consequences

continuously updated blog about China & India

ChiaHou's Book Reviews

continuously updated blog about China & India

What's wrong with the world; and its economy

continuously updated blog about China & India