Friday, April 08, 2016

China’s Global Investment Spree 
Is Fuelled By Debt
The Economist article highlights how Chinese firms with lots of debt & with very little international experience are going out globally & buying global assets .. "A new concern is growing: that the surge in outbound investment is a sign of weakness in the Chinese economy .. Also Chinese buyers, by and large, are far more indebted than the firms they are acquiring. Of the deals announced since the start of 2015, the median debt-to-equity ratio of Chinese buyers has been 71%, compared with 44% for the foreign targets, according to The Economist’s analysis of S&P Global Market Intelligence data. Cash cushions are generally also much thinner for Chinese buyers: their liquid assets are roughly a quarter lower than their immediate liabilities. The forbearance of their creditors makes these heavy debts more bearable in China than they would be elsewhere. But the Chinese buyers are financially stretched, all the same. Where, then, are they getting the money for the deals? For many, the answer is yet more debt."
LINK HERE to the article

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