Evergrande Was Just One of China’s Blind Spots
Companies increasingly have turned to supply chain financing to grease the wheels of business. That’s all well and good until repayments stop and credit tightens.
In the shadows.
Photographer: Qilai Shen/BloombergEven the savviest of investors were caught off-guard by the speed of China Evergrande Group’s unraveling. They shouldn’t have been: Trouble has long been brewing at China Inc., where balance sheets are weakening in the face of a rocky economic recovery. This could be Beijing’s worst blind spot yet.
At over 1,100 listed companies in China’s industrial and manufacturing sectors, receivables are piling up; cash conversion cycles are getting longer (that is, the time it takes to turn inventory investments into cash); and net short-term debt levels are becoming increasingly volatile, a Bloomberg Opinion analysis shows.