The lull between Christmas and the New Year is a traditional time for companies to discreetly slip out ugly news. Right on cue,? Shanghai-listed Sichuan Changhong Electric, the mainland's largest television manufacturer, announced a whopper: US importer Apex Digital owes it US$467.5 million.
The company holds out hope of recovering, perhaps, US$150 million, but will need to make huge provisions for bad debt resulting in its first annual loss.
The incident is likely to renew fears of mainland firms coming unstuck in global markets dominated by street-smart multinationals.
Changhong appears to have found itself in a trap. It had to keep supplying the delinquent Apex with inventory because it had become too important to fail.
About 50 per cent of Changhong's sales in the first three quarters of this year were to Apex.
Investors can hardly claim complete ignorance. Changhong's accounts for last year already revealed 4.4 billion yuan in receivables outstanding to Apex.
The company could be excused for believing its top customer was a good credit risk. Apex's founders were lauded by Time magazine on its list of 15 top global business leaders only two years ago.
