China debt fears after closure
Thursday 08 October 1998
Local investors queued to withdraw their cash and analysts warned that the central government could be backing away from local debt.
Peking's announcement followed a recent capital injection into the Guangdong International Trust and Investment Corp (Gitic) by the provincial government.
Early last month, China's southern Guangdong province sent top officials across the border to Hong Kong to reassure bankers that Gitic had the full support of the government.
At about the same time, provincial officials were in Peking, pleading for cash to help Gitic repay up to $1bn (pounds 600m) in loans to foreign banks and other investors.
Peking refused. In a rare central government strike at a provincial fiefdom, the central bank shut down the nation's second-largest investment firm. It also delivered a blunt message to the Cantonese-speaking leaders of China's richest province, the testing ground for the mainland's 20- year capitalist experiment.
"If China doesn't honour the debt it can forget about borrowing internationally," said one analyst.
Gitic and central bank officials would not comment on the extent of the corporation's domestic or foreign debt, but foreign bankers estimated it had some $500m in short-term debt and $500m in long-term debt. "Gitic is not asset-poor. Its only problem is a mismatch in duration," said Hoong Yik-luen, head of China research at ING Barings.
Other finance industry officials said the company had been hit by a slump in stock and property markets, but it was also using short-term borrowings to fund long-term obligations.
China said late on Tuesday that Gitic, which has interests ranging from finance to property and toll roads to car-tyre production, was closed because of an inability to repay debt.
The Bank of China, one of the nation's big state-run commercial banks, would act as trustee, assuming its debts and assets, and creditors have been asked to register claims before 6 January. Priority would be given to overseas debt approved by foreign exchange authorities and domestic personal savings.
Shares were yesterday suspended in its Hong Kong-listed subsidiary, Gitic Enterprises, which went public last year.
- 1 Tidal launch: The most pretentious lines from Alicia Keys' valedictory speech
- 2 Trevor Noah: Jon Stewart's replacement faces online criticism over 'anti-Semitic' tweets
- 3 I might be an MP, but that doesn't stop me fighting sexism with my breasts
- 4 Martha Stewart accuses Snoop Dogg of 'smoking for four hours' during Justin Bieber Roast
- 5 Gamers confess the worst things they've done in The Sims
Prince Charles ‘burns 1.3 tons of carbon’ in private helicopter after urging public to turn off lights for Earth Hour
Martha Stewart accuses Snoop Dogg of 'smoking for four hours' during Justin Bieber Roast
April Fools' Day 2015 live: The best pranks and fake stories from around the world
University of Cambridge: Remains of 1,300 scholars are found under building
Jeremy Clarkson 'could be given minder' ahead of a potential Top Gear return
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
Katie Hopkins attacked me on Twitter — so I reported her to the police for inciting racial hatred
David Cameron calls Labour 'hopeless, sneering socialists' while announcing 7-day NHS plans
iJobs Money & Business
£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...
£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...
£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...
£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...