"Mutual insurance system" rises in Hangzhou furniture industry

An enterprise filed for bankruptcy, causing an industry to fall into quagmire—

Hangzhou furniture industry suffers from mutual protection

A construction company based in Dongyang, Zhejiang Province, unexpectedly filed for bankruptcy, causing the Hangzhou furniture industry in Zhejiang to face the dilemma of a deteriorating financial environment and bank lending, resulting in financial difficulties for the entire industry and affecting other industries. The cause of this strange phenomenon of "others sneezing and catching a cold" is the mutual insurance system.

Preliminary statistics, the amount of debt associated with the crisis involving more than 10 billion yuan, involving more than 100 companies in the industry, involving 23 banks. Yang Youmin, secretary-general of the Hangzhou Furniture Chamber of Commerce, said that under the coordination of the government, the current financial difficulties of the Hangzhou furniture industry have basically passed through.

Under the coordination of the government, the temporary financial difficulties may be temporarily resolved. However, how to weigh the pros and cons of the mutual insurance system is worth pondering.

Crisis caused by mutual insurance

"This crisis is a typical large-scale crisis caused by mutual insurance of enterprises." This is a description of this crisis by relevant persons in the Hangzhou Furniture Chamber of Commerce.

Tianyu Construction was the first of mutual protection dominoes to fall. On December 20 last year , the Jiangsu branch of Tianyu Construction triggered a lawsuit for illegal private fund-raising, and the court opened the case on the same day. After that, all accounts and real estate of Tianyu Construction were successively frozen and sealed by the court. At the end of last year, Tianyu Construction formally filed a bankruptcy application with the Dongyang City Court.

The total amount of loans of Tianyu Construction itself is not huge- 140 million yuan in the construction bank loan , but 90 million yuan of which is mutually insured with Jiayi Group and its affiliated company Huazhou Group.

Affected by Tianyu Construction's application for bankruptcy, Jiayi Group's 90 million yuan loan from CCB was uninsured, which triggered CCB to collect 50 million yuan from Jiayi Group. Jiayi Group and Huazhou Group were collectively collected by several banks for 1.15 RMB 100 million and overdue loans of RMB 120 million occurred, involving Huaxia Bank, Bank of Beijing, Guangdong Development Bank, China Everbright Bank, China Merchants Bank, etc.

In response to the liquidity crisis, Jiayi Group has borrowed nearly 200 million yuan from the private sector .

Affected by the Jiayi incident, Zhejiang Rongshi Industry Group and its subsidiaries Hangzhou Rongye Furniture Co., Ltd. and Zhejiang Rongye Furniture Manufacturing Co., Ltd. are facing great pressure from banks to collect loans, and the normal liquidity chain of enterprises is on the verge of breaking.

Hangzhou furniture by the Chamber of Commerce preliminary statistics, the amount of debt associated with the crisis involves more than 10 billion yuan, involving more than 100 companies in the industry, involving 23 banks, spread to the furniture industry employed population over 50,000.

The crisis has further spread out of the furniture industry. Many large enterprises such as Tiger Holding Group, Zhongye Holdings and Zhengjian Construction are also facing difficulties due to the mutual influence of the mutual insurance circle.

Credit crisis for quality customers

The characteristics of this crisis, in addition to being triggered by mutual insurance of enterprises, is that leading enterprises in medium-sized to large-scale industries have encountered a credit crisis. Yang Youmin, secretary general of the Hangzhou Furniture Chamber of Commerce, said that Zhejiang's furniture market ranks second in the country, second only to Guangdong.

Jiayi Group 's sales revenue in 2011 was 600 million yuan, tax was 80 million yuan, and there were more than 900 employees. Huazhou Group paid RMB 55 million in taxes in 2011 . The total assets of Rongshi Group and its affiliated companies are 946 million yuan. In 2011 , the sales revenue was 1.5 billion yuan, more than 40 million yuan in taxes , and more than 3,000 employees. The total assets of Zhongye Holdings and its affiliated companies are 1.4 billion yuan and more than 50 million yuan in taxes . The total assets of Tiger Brand Holding Group are 2.85 billion yuan, and it has 15 wholly-owned (holding) enterprises . It has ranked among the top 500 Chinese private enterprises for 5 consecutive years .

In a report submitted to the Hangzhou Municipal Government, the Hangzhou Furniture Chamber of Commerce stated that in view of the fact that the main businesses of the above-mentioned industries are normal and the level of assets and liabilities is basically reasonable, it is just a bank credit crisis triggered by mutual insurance. The chamber of commerce requests governments at all levels to come forward to coordinate and organize enterprises and banks to negotiate solutions together.

Yang Youmin said that the current overall operation of the furniture industry is normal, only because Tianyu Construction accidentally filed for bankruptcy, which led to the mutual protection of the furniture companies encountered difficulties in the capital chain. After government coordination, the situation is generally controllable. In the first half of this year, Hangzhou's furniture trade volume increased by 12% year-on-year .

Increased risk of mutual insurance

In the recent special meeting of the Zhejiang Provincial Finance Office convening the heads of various institutions to improve the financial development environment and ensure stable economic growth, many speakers all mentioned "guarantees".

Li Hong, deputy governor of the People's Bank of China Hangzhou Center Sub-branch, said that in the second quarter, the capital chain breakage incident still occurred, which gradually exposed and spread the risks of joint guarantees and invisible mutual guarantees of enterprises, and the willingness to guarantee between enterprises was reduced; some The guarantee company has become insolvent and the business has shrunk; the trust between banks, enterprises and guarantee companies has been affected. The problem of difficulty for borrowers to guarantee has become increasingly prominent. The entire financing guarantee system is facing greater pressure and may increase part of it The pressure of the enterprise's capital chain. Li Hong specifically mentioned that, according to monitoring, since May , 60% of the companies insured have financial difficulties after guaranteeing compensation for other companies.

Han Yi, director of the Zhejiang Provincial Banking Regulatory Bureau, said that due to insufficient market confidence, the risk of mutual insurance, blind diversification of enterprises, and involvement in private lending and other factors, some companies have problems with capital chains. He specifically mentioned that nearly 40% of Zhejiang's corporate loans are mutual guarantee loans.

Li Hong revealed that the partial credit environment has not yet been restored, which is highlighted by the rebound in non-performing loans. In late May, non-performing loans 67.28 billion yuan, Zhejiang Province, an increase of 18.14 billion yuan over the beginning.

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