China’s state-owned car maker gets a huge lifeline but what about private firms?
- Struggling rust-belt will benefit but the US$145 billion line of credit has raised questions about Beijing’s commitment to the private sector
- Analysts say the government needs to boost both sides of the economy at the same time
The extension of a line of credit worth more than 1 trillion yuan (US$145 billion) to a single Chinese state-owned company – vehicle manufacturer FAW Group – has raised questions about the government’s commitment to the private sector, which is being hit hard by the escalating trade war with the United States.
But analysts say that the move makes sense, given Beijing’s conflicting priorities of providing economic support for the struggling northeast rust-belt region while also seeking to boost private firms to help stabilise the overall economy.
“It is rare and hard to understand why such a big sum of money would go to a single company,” said Aidan Yao, senior emerging Asia economist at AXA Investment Managers.
FAW’s market share for traditional cars and trucks has declined in recent years, but its importance to the struggling economy of China’s northeast, as well as hopes for a new start with electric vehicles, support the decision to give the state-owned company access to so much money.
FAW said that 16 commercial banks, led by China’s policy bank China Development Bank, had signed the agreement approving the line of credit. The granting of specific loan amounts will need to be reviewed on a case-by-case basis.
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A signing ceremony between FAW and the banks was witnessed by provincial party secretary Bayinchaolu, Jilin governor Jing Junhai, as well as Zhu Hexin, a vice-governor of the People’s Bank of China, and Zhou Xiaofei, a deputy general secretary at the National Development and Reform Commission.