FAW, maker of China’s iconic Red Flag cars, is offered record 1 trillion yuan credit line
- It comes as the country’s carmakers face hazardous times amid slowing sales and a law change that may dent their profits
- If fully used, the US$145 billion of credit available to FAW would be enough to buy General Motors, Ford and Tesla combined
It is one of China’s most beloved home-grown companies, its iconic Red Flag cars an instantly recognisable symbol of Communist Party might.
So it stands to reason Beijing would pull out all the stops to keep FAW Group, the country’s oldest carmaker, afloat during challenging times.
The government has lined up a record credit line of 1.015 trillion yuan (US$145 billion) for the time-honoured vehicle manufacturer, signalling an unprecedented level of financial support for state-owned enterprises.
If fully used, it would be enough to buy General Motors, Ford and Tesla combined.
“One trillion yuan is a staggering amount of cash that can be used to do so many things, such as big buyout deals and investment into new areas such as electric cars,” said Wang Feng, chairman of Shanghai-based financial services firm Ye Lang Capital. “It’s the latest sign that state-backed businesses are still the priority. It is not unusual for the government to use its financial resources to support a large state-owned company.”
Shares of FAW Car, the group’s listed unit, jumped by their 10 per cent daily limit amid a declining market in Shenzhen to a two-week high of 6.18 yuan.