Trade

“Millions” of Chinese Businesses Threatened by Virus

SK Ashby
Written by SK Ashby

Treasury Secretary Steve Mnuchin says he does not see the coronavirus threatening the purchasing agreements included in "phase one" of Trumps "biggest and greatest deal ever," but consumer demand in China has fallen into the toilet while the virus is even eroding demand here in the United States.

On top of that, Bloomberg reports that literally millions of small Chinese businesses are at risk of collapsing in the next month because they're locked down and have no access to loans or financing to ride it out.

Moreover, businesses facing the greatest risk of collapse are those directly related to the trade war and Trump's 'greatest deal.'

With much of China’s economy still idled as authorities try to contain an epidemic that has infected more than 75,000 people, millions of companies across the country are in a race against the clock to stay afloat.

A survey of small- and medium-sized Chinese companies conducted this month showed that a third of respondents only had enough cash to cover fixed expenses for a month, with another third running out within two months. Only 30% of such firms have managed to resume operations due to a complicated local government approval procedure as well as a lack of employees and financing, a government official said at a press conference on Monday. [...]

Many of China’s businesses were already grasping for lifelines before the virus hit, pummeled by a trade war and lending crackdown that sent economic growth to a three-decade low last year.

At most risk are the labor-intensive catering and restaurant industries, travel agencies, airlines, hotels and shopping malls, according to Lianhe Rating.

Who is going to buy American farm goods -- who is going to buy our pork, soybeans, and sorghum -- if China's catering and restaurant industries collapse?

China is suppose to literally double the amount of American agricultural products they purchased before Trump's trade war began under "phase one," but the virus is threatening business itself. Exports could actually tumble lower than they were in 2019 if even half the number of businesses at risk of closure do eventually close.

Consumers demand doesn't just fall out of sky and, as you may recall, China has said they would only purchase American farm goods based on consumer demand and market conditions.

The market conditions are pretty fucked right now.