3) Huge corporate debt
There are questions over the sustainability of Chinese economic growth and its current consumer boom. China faces a debt time-bomb which is limiting corporate investment and worrying consumers. Heavy debt loads held by major corporations, including seafood firms, are also a deterrent to spending on product development, marketing and distribution. A pick-up in real estate investment and government-funded infrastructure building has boosted economic growth recently, but there are many questions over how sustainable this is, given the level of debt that has propelled such growth. Having risen sharply in the years following the massive credit stimulus of 2009, China's corporate debt now sits at 160 percent of GDP – twice that of the United States. Credit rating agency Standard’s & Poor’s has estimated that this could climb 77 percent over the next five years to USD 28.8 trillion (EUR 27.3 trillion). The opacity of China’s political system and its data doesn’t lend much confidence.
China’s economic growth is driven by government spending and government-directed credit. It’s worth noting that while infrastructure investment rose 20.9 percent year-on-year in the first half of 2016, there was a mere 2.8 percent growth in private investment. That suggests there’s less confidence in the private sector in China’s economic prospects. Likewise, there’s less access to or appetite for credit among parts of the private sector that are already over-indebted. A close look at the balance sheets of leading listed Chinese seafood companies will confirm this.
Access to capital remains a block to Chinese corporate expansion in order to cash in on these opportunities. Cash-flow problems and the pressure of servicing debt is squeezing the room for investment among many private Chinese firms while the mainland Chinese stock exchange – a reliable way to raise funds in most economies – is in a bad state.
