Worries as debts start to mount
Beijing is becoming nervous about the build-up of industrial debt as the economy starts to cool
Beijing is getting increasingly nervous about the rapid build-up of debt in industries such as steel and power, as cooling demand and overcapacity cause delays in payments amid the slowest economic growth in three years.
State agencies, including the Ministry of Industry and Information Technology and the China Banking Regulatory Commission, have recently held meetings with representatives from five industries to discuss the situation, said an official at the China Iron & Steel Association, who attended one such meeting last week.
The industries - steel, coal, power, non-ferrous metal, and machine building - have been hit hard by weakening demand as the economy slows, the official said, but he did not elaborate on the measures considered by the government to aid these sectors.
Crude steel output dropped 0.1 per cent in the first seven months of this year, the first decline since 2000, the official said.
Accounts receivable - the money owed by clients that buy steel, such as property developers or infrastructure companies - surged 20 per cent at the end of June from a year earlier to 116 billion yuan (HK$141.88 billion).
Meanwhile, accounts payable - what steelmakers owe raw material suppliers - rose 6.5 per cent to more than 400 billion yuan, he said. The delay in payments has affected suppliers' repayment of bank loans, creating a debt chain.