Chinese difficulties for corportes and interest on debt - UOB

Chinese difficulties for corportes and interest on debt - UOB

20 April 2016, 22:03
Vasilii Apostolidi
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Analysts at UOB Group explained that there has been more news coming out from China that point to the difficulties facing Chinese corporates.

"In our daily report yesterday, we talked about the spiking yields of yuan-denominated company bonds due to a fresh wave of defaults at state-owned enterprises.

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Bloomberg reported that Chinese firms now take a record 192 days to collect payment for their goods or services from when they pay for the inputs – the so-called cash conversion cycle. That is much higher than the 125 days five years ago.

The longer the cash conversion cycle is, the tougher it is for firms to pay their suppliers as well as debt. Cash has become a valuable commodity in China after company profits declined for the first time in three years and as debtors face their hardest time ever paying interest."

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