China is snapping up stakes in private companies at a record rate, as the trade war, economic slowdown and credit squeeze heap pressure on entrepreneurs
The investments mark a reversal after decades in which state-owned enterprises have shrunk in importance, as reflected in measures such as their share of the workforce or asset ownership. Since China’s public-sector companies are typically less efficient or innovative than their private rivals, the shopping spree could lead to a fresh drag on growth.
Huang Shuishou, a 72-year-old businessman dubbed the country’s “king of plastic film” by local media and others including domestic official trade organizations, is among the entrepreneurs selling stakes to alleviate financial difficulties. The deal helped the holding company repay loans for which it had pledged more than two-thirds of its shares in Zhejiang Great Southeast as collateral. Mr. Huang didn’t respond to requests for comment. —Andrew Collier, managing director at Orient Capital Research In total, state-backed buyers bought 47 stakes in listed private companies from January through June, according to Fitch Ratings. That compares with 52 deals in all of 2018.
The Fitch figures probably don’t capture the full size of the state’s stepped-up involvement. From October 2018, local authorities and state-linked entities quickly put together about $100 billion of “relief funds” to aid private companies, according to a January estimate from TF Securities. Authorities are acting after failing to persuade banks to lend more to riskier private borrowers, said Andrew Collier, Hong Kong-based managing director at Orient Capital Research. “Beijing is stepping in because they are worried about a sharp rise in unemployment,” he said.
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