1) Debt troubles
China’s private sector – and this includes seafood firms – faces a difficult financial outlook.
Private businesses have been cash-strapped since the government forced the retreat of shadow banking, the high-interest, informal, underground lenders who are often the sole finance source for riskier enterprises in China. And while government is pressing banks to cut rates for small and medium enterprises, those efforts are unlikely to mean more cash for marginal firms with difficult financial accounts. Many seafood processors are dependent on borrowings for survival, borrowings which have been rolled over until now. The current travails of the debt-laden Dalian Tianbao processing firm is a case in point.
China’s debt troubles – which often manifest themselves in opaque financing vehicles at local government level, as well as the corporate level – are placing a question mark over what appear to be white elephant projects promoted by local governments, such as a giant processing and trading hub for the distant-water fleet planned by both the Qingdao and Zhoushan governments, working with private and state-owned firms. The fiscal deficit, at 4.2 percent in 2018, is the highest since the 1990s, and the actual deficit may be higher. China has a debt problem but now wants to unleash a new wave of credit in 2019 to drive the economy, a balancing act which will be difficult to achieve. Expect this conundrum to manifest itself further this year.
