Indebted Private Companies Sell Low to Govt

SCMP: Is Chinese capitalism in crisis, as stock market rout drives private companies into the state’s arms?
At least 32 companies listed on the Shanghai and Shenzhen bourses sold controlling stakes to the Chinese state as of October 17, six of them to the central government, while 26 were taken over by provincial or city-level agencies, according to data by Shanghai Wind and China International Capital Corporation (CICC).

Call it privatisation in reverse, or re-nationalisation, as Chinese capitalism lays in crisis.
Almost every listed company or its major shareholders have loaned shares.
All but 13 of the 3,491 companies listed on China’s two stock exchanges have pledged their equities as collateral for bank loans, according to data by the China Securities Depository and Clearing Corporation, with the total value estimated at 4.5 trillion yuan, equivalent to the world’s 21st biggest economy and more than Hong Kong’s gross domestic product.

...Chinese Vice-Premier Liu He entered the fray on Friday, speaking in an interview with the Communist Party’s mouthpiece People’s Daily newspaper to calm nerves. The Chinese government is helping private companies get over their financial difficulties, extending the kind of financial aid that underscored the coexistence and cooperation between the public and private sectors, he said.

“It’s a good thing,” Liu said. “The state can divest, when businesses at the private companies improve.”

...The bailout is not unlike the US Troubled Asset Relief Programme (TARP) signed into law during the George W. Bush administration, which spent US$475 billion to bail out Chrysler, General Motors and 16 other indebted US corporations.

...The shrinking of China’s private sector had been written in official economic statistics since June 2017, when contributions to GDP was first surpassed by the state sector.

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