Tim Culpan is a technology columnist for Bloomberg Gadfly. He previously covered technology for Bloomberg News.

Christopher Langner is a markets columnist for Bloomberg Gadfly. He previously covered corporate finance for Bloomberg News, and has written for Reuters/IFR, Forbes, the Wall Street Journal and Mergermarket.

Apple is a hit in China, and not just with consumers. Now, the nation's CFOs have joined the fan club.

It isn't the devices getting financial execs all excited, rather Apple's balance-sheet strategy. Over the past few years, the iPhone maker has taken to issuing debt to increase its return on equity and give money back to shareholders.

Chinese tech companies love that idea. With many publicly traded in the U.S. or Hong Kong, they've found borrowing abroad a great way to raise funds and boost returns. Another boon, they don't have to beg authorities in Beijing for permission to move capital around.

Baidu, owner of China's biggest search engine, doubled the size of a five-year loan to $2 billion, Bloomberg News reported Friday, citing people familiar with the matter. That would take the amount that companies in Asia's largest economy have raised from bank facilities and international bonds since the last quarter of 2014 to about $28 billion. Stock buybacks total $10 billion over that period.

Buyback Time?
Chinese tech companies have borrowed almost $28 billion since the last quarter of 2014, and bought back about $10 billion of stock
Source: Bloomberg

Investors will be curious to know whether Baidu plans to invest those funds in its own business, or put the money straight into shareholders' pockets. Baidu doesn't look hard up. Its search-engine operations are a cash cow, throwing off more than $500 million every quarter, and it's already sitting on $11 billion in cash and short-term investments with precious little debt coming due anytime soon.

Its shareholders, on the other hand, could probably do with some largess. And they're not the only ones.

Of the 41 Chinese internet companies listed offshore, only four paid a dividend last year. Yet, combined, they have $33 billion in cash, six times the amount at the end of 2011.

Nice Problem
Baidu has accelerated acquisitions and investments, yet cash keeps piling up
Source: Bloomberg; company filings

What Baidu has been doing, though, is dipping into the kitty for buybacks. Investors would appreciate anything to give the stock a fillip. Missed sales outlooks and tighter margins mean Baidu's shares are down almost 30 percent from their November 2014 peak. New measures from the Cyberspace Administration of China following a controversy over paid medical advertising haven't helped.

Bumpy Ride
Baidu Chairman Robin Li has tried to smooth the ride for investors with buybacks and buyouts
Source: Bloomberg

For banks' part, it's little wonder they've been falling over themselves to lend to Baidu. That huge cash pile and solid cash flow make it almost immune to the short-term drama of daily news flow, plus there's not a lot of great places for banks to lend money in China these days, so blue chips are a welcome sight.

Before this latest round of financing, Baidu's borrowings remained relatively low at 23.3 percent of assets and 40.5 percent of equity. Its operating earnings are enough to pay its interest more than eight times over.

Apple has already shown Chinese companies how to work the balance sheet. With all that cash and so little owing, Baidu's shareholders might expect a handout.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. Most of that cash, about 50 percent, is Alibaba's.

To contact the authors of this story:
Tim Culpan in Taipei at
Christopher Langner in Singapore at

To contact the editor responsible for this story:
Katrina Nicholas at