Short on Cash, Businesses in China Rely on I.O.U.s to Keep the Lights On

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Another company that owes Bauing money is the state-owned firm China State Construction Engineering. China State said it had owed $490 million in i.o.u.s to all of its suppliers at the end of last year.

Another major property developer, Greenland Holding, which was founded by the Shanghai government and has property developments in dozens of cities across China, had $550 million worth of unpaid notes out to suppliers by the end of last year, according to its annual report. The company said that was 10 times the amount it had outstanding in 2017.

Greenland did not respond to a request for comment.

One state-owned conglomerate, China Resources, which is involved in everything from construction to health care, has doubled its issuance of i.o.u.s, with $2.7 billion in slips of paper unpaid at the end of last year. The company did not respond to a request for comment.

The boom is worrying some regulators. At least one property developer and five suppliers to property developers have received inquiries from exchanges where their stocks are publicly listed, raising concern over the sudden increase in these commercial acceptances, according to corporate filings.

In response to one such inquiry, RiseSun Real Estate Development, a large developer that has come into trouble overseas over its plans, disclosed that it had increased the use of commercial acceptance notes and bankers acceptances, a similar note but backed by banks, by more than 13 times. At the time it owed $460 million of commercial acceptances to its partners and suppliers.

Xue Ze, a spokeswoman for RiseSun, declined to comment.

Smaller business owners like Mr. Zhang, the architect, know the gut punch feeling that comes when companies do not make good on their commercial acceptances. Mr. Zhang recently took an unpaid i.o.u. to the developer’s bank.

“We were told by the bank that the company had moved its money out,” he said.



Source : Nytimes