Money panic struck cable company cash flow tight

The recent “money shortage” in the Chinese financial system has made commercial banks more cautious when lending to the private sector. This is bad news for wire and cable companies that have difficulty obtaining bank loans.

Although the People's Bank of China has stated that it will loosen tight control over cash, some companies say that it is increasingly difficult to obtain funds in some places, and customers are turning to cash substitutes for settlement.

The liquidity tightness of the Chinese banking system this month is generally believed to be due to the government’s desire to curb excessive credit expansion. It is unclear how much influence the non-financial sector has been affected by. However, the information disclosed by the above companies shows that if the inter-bank cash lending rate is still extremely high, other areas may also be hit.

People from the domestic wire and cable industry have all stated that over the past few weeks, companies are increasingly using bank acceptance bills (a type of bank-issued short-term bill for trade financing) rather than cash.

Liu Jiang (translation), a purchasing manager of a copper wire cable manufacturer in Zhejiang Province, China, stated that some customers have been using bank acceptance bills because they cannot get enough cash. Liu Jiang stated that bank acceptance bills are relatively easy to obtain because they are not included in bank balance sheets. He also said that the company’s financing costs have more than doubled since the beginning of this month, but it is still affordable.

A physical copper trader in Shanghai, a commodity trading company, stated that some large and medium-sized banks are not allowed to redeem bank acceptance bills ahead of time in order to retain cash. The agency is currently relying on its own cash to maintain operations.

In a recent research report, Anne Stevenson-Yang, the founder of research firm J Capital Research, said that the increase in the discount rate of bank acceptance bills will push up the financing costs in the real economy, especially those relying heavily on such bills for financing. industry.

The People's Bank of China has stated that it wants to end the tight cash situation among banks. The bank said on Tuesday that it has provided funding to some financial institutions and plans to continue doing so. This is expected to ease the pressure on the real economy. However, as the central bank has warned banks to control lending, related issues may continue.