HomeNewsFinanceCoronavirus Outbreak Threatens the Survival of Millions of Chinese Firms

Coronavirus Outbreak Threatens the Survival of Millions of Chinese Firms

The coronavirus outbreak has many different consequences. Outside of people’s health, the ongoing epidemic also threatens millions of Chinese firms.

The Coronavirus is a Very big Problem

When an epidemic breaks out, public health and safety are the first and foremost concerns. With patients being discovered all over the world, the coronavirus threat will not come to an end just yet. In fact, in Italy, several new cases have been discovered just last weekend.

Looking beyond public health, everyone acknowledges this situation cannot remain in place for too long. The longer an epidemic lasts, the bigger the impact on daily life will come. In China, that situation is deteriorating very quickly.

Millions of local firms and startups find themselves treading water. Many offices remain closed indefinitely. There is also the problem of dwindling cash reserves. The PBOC has confirmed it will begin sanitizing paper money and taking it out of circulation temporarily. 

Making matters worse is the situation banks have to contend with. They receive requests to extend deadlines on yuan in debt. So far, the banks are not inclined to agree to any extension for larger sums. That creates a very volatile cocktail waiting to explode at any given moment. 

The Race is on

For all of the affected Chinese companies, no immediate solution is in sight. Roughly one in three has enough cash to cover monthly expenses for the next 30 days. Another third has the reserves to cover two months of expenses. This is far from an ideal situation across the board.

Private businesses are racing to access funding. Without extra liquidity, they cannot meet upcoming deadlines for salary and debt payments. As China’s economy remains in limbo, this situation may not improve soon. Unfortunately for thousands of companies, that may result in a temporary closure.

The funding problem is not new to Chinese private businesses. Banking giants have remained hesitant to extend a helping hand. This is despite the government attempting to boost lending and cutting interest rates. 

Most financial institutions provide financial support to combat the coronavirus outbreak. Anything beyond that scope is of little interest. The country’s biggest lender has extended relief to 5% of its SMB clients. A good start, but there is a lot of work to be done. 

JP Buntinx
JP Buntinx
JP Buntinx is passionate about cryptocurrencies, fintech, blockchain, and finance. He currently resides in Belgium.


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