October 08, 2019 | Report
Capital constraints will impose increasing rationality on decision making for Chinese companies and trigger a new focus on quality for goods and services purchases. MNCs are positioned for gains, even amidst decelerating growth.
Tightened capital conditions in China, and the decelerating growth it fosters, are gradually undermining the conditions that have permitted government supported companies to access artificially low-cost credit, ignore the price of credit or avoid timely loan repayment. Constrained capital resources – and the higher costs of capital that come with it – will necessarily cause Chinese companies to be more concerned about their returns on capital deployed and the efficiency of their capital use. Counter-intuitively, debt-constraints could cause price rises as companies that previously sold below cost to enhance market share find themselves struggling for cashflow in the absence of new loans.