Chinese cash is turning into kryptonite as all around the world chinese investors are either facing bans or going bust, and the losses are piling up. 

Chinese companies were on a buying spree right before the novel coronavirus broke out. However, after the outbreak, they tried to capture assets with hostile takeovers across the globe.

All those investments are now running into losses and new deals are increasingly looking unlikely as China’s biggest groups are struggling in a post-pandemic world. 

In 2015, Chinese conglomerate Fosun International had made a major investment. It had put money in Cirque du Soleil Entertainment — a company that produces the world-famous circus by the same name. However, now Cirque du Soleil is struggling. Fosun International’s investment has been wiped out and the company is under a mountain of debt. The creditors are taking control of it. 

Also read: Australia blocks Chinese firm’s bid to buy major dairy firm

In 2014, Chinese firm Hony Capital had bought Pizza Express — a British business with pizza outlets around the world. The deal was worth $1.54 billion. However, six years later, a group of British creditors want the company back as the Chinese company can not keep up with the payments. Reports say the Chinese company will return Pizza Express to the British.

While China is trapping countries with debt, these two Chinese companies have lost control of their crown jewel acquisitions due to debt. This is not a sporadic case of cruel irony, but is the tip of China’s debt iceberg.

China has a hugh debt problem

According to a report, the Chinese economy is bracing for many defaults. China’s bond market is worth over four trillion dollars. Chinese economic recovery has been fragile so far. So, it is not in a position to save many distressed borrowers, and there will be defaults.

Debt papers worth well over $500 billion are set to mature by the end of this year. According to a report, the government has neither the firepower nor the will to backstop it all. China’s total domestic debt hit 317 per cent of the GDP.

For the longest time, China has fueled its growth using debt. A lot of the borrowings are off the books, and the hidden government debt could be around $4.2 trillion. The Chinese state is running out of cash.

These two Chinese companies are not the only ones suffering. More chinese companies are being blocked from takeovers abroad. The latest setback comes from Australia where Lion Dairy and Drinks wanted to sell to a Chinese firm Mengniu Dairy, but the deal fell off as the Treasurer of Australia, Josh Frydenberg, objected to the agreement. He said that the deal will be “contrary to national interest”.