More than 300 Chinese firms including Meituan Dianping, China’s largest food delivery company, and smartphone maker Xiaomi Corp are seeking for bank loans totaling at least 57.4 billion yuan ($8.2 billion) to soften the impact of the coronavirus.
Approximately 300 Chinese companies are in search of bank loans amid rising concerns on the coronavirus spread.
The total of loans banks are asking for is around 57.4 billion yuan ($8.2 billion).
The sources told Reuters that the government has totally blocked the cities, shut down transport lines and closed places of public gathering. In that way, the economic growth is doomed to a huge slowdown. Some analysts say that the latter could slow to 5% or less in the first quarter. It doesn’t help that all major companies had extended the closure of their factories and are asking their workers to work from home. This will contribute to manufacturing slow down and give global supply chains a hard time.
Xiaomi Asks for $716 Million
Among the companies who asked for a loan are food delivery giant Meituan Dianping, smartphone maker Xiaomi Corp, ride-hailing provider Didi Chuxing Technology Co, facial recognition start-up Megvii Technology Inc and internet security business Qihoo 360 Technology Co. The sources said all of these companies were somehow connected with the epidemic. The death toll from the coronavirus surpassed 1,000, Chinese health officials announced on Tuesday.
On Monday, millions of people in China returned to work following a prolonged break for the Lunar New Year after the discovery of the coronavirus, which originated in Wuhan in December. Over the weekend, the Wuhan coronavirus claimed more lives than SARS, which also broke out in China in 2003.
It is expected that companies who asked for loans in the Chinese capital are likely to get fast-track approvals and preferential interest rates.
However, one of the sources confirmed that banks will have the final say on lending decisions. Also, the interest rates are probably to be on par with those offered to banks’ top clients.
Xiaomi, the world’s fourth-biggest smartphone maker, is seeking 5 billion yuan ($716 million) in order to make and sell medical equipment including masks and thermometers. The company’s gross profit surged 25.2% year on year to 8.2 billion yuan.
Beijing City Government Pledged to Help
Meituan Dianping asked for 4 billion yuan, partly to help finance free food and deliveries to medical staff in Wuhan. The company has been profitable for the past two quarters.
Didi Chuxing, “severely impacted by the virus outbreak”, is seeking 50 million yuan.
Beijing-based Qihoo 360 applied for 1 billion yuan ($143.3 million) loan to buy medical-related products and finance work on apps for tracking the virus.
Facial recognition start-up Megvii asked for 100 million yuan to develop a technology of identifying masked individuals in crowds.
The financial bureau of the Beijing city government previously said that businesses seeking financial support could ask for its help.
There are plenty of other companies that are looking for a financial boost. Some of them include vegetable market operators, ambulance manufacturers, environmental protection firms and other businesses key to maintaining food supplies and supporting efforts to contain the outbreak. However, it is still not confirmed that all of them are creditworthy.
One of the sources stated:
“The banks won’t lend to all because they need to evaluate whether those companies are really able to pay back.”
Asian Economies Most Affected by Coronavirus
China’s health advisor Zhong Nanshan said on Tuesday that the country needs a stronger control system when it comes to containing the coronavirus outbreak, adding that the situation is slightly improved as new virus diagnoses are in decline.
Zhong claimed the coronavirus has been very contagious so far and suggested all wildlife trade should be banned until the infection is contained. He added it is not certain if coronavirus spread comes from “superspreaders.”
Finally, he joined Moody’s forecast from earlier today, expecting the number of coronavirus cases to peak in February and then start slowly to decrease.
Moody’s stated earlier that economies of the countries in the Asia-Pacific region are more exposed to negative coronavirus influence than European or American, as they have stronger trade cooperation with China.