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Economy

China-related bankruptcies spike in Japan

Marine shipping company Daiichi Chuo Kisen has suffered amid China's economic slowdown.

TOKYO -- The Chinese economy's woes are rippling toward Japan and the rest of the world, triggering a wave of bankruptcies among companies dependent on the Asian giant.

     From April 2015 to February 2016, Japan saw 80 bankruptcies caused by such factors as China's slowing economy and higher production costs, with liabilities totaling more than 230 billion yen ($2.01 billion), according to Tokyo Shoko Research. The number of cases jumped 70% compared with a year earlier. Total liabilities rose by roughly a factor of 10 to account for about 13% of the total among all Japanese corporations that went bankrupt in the period as opposed to just over 1% in all of fiscal 2014.

     There were 10 China-related bankruptcies in February alone, with net liabilities of about 3 billion yen.

     China has reported that gross domestic product expanded 6.9% in 2015 -- the slowest in 25 years. Growth in industrial output and capital investment has also sagged. Many see the deceleration continuing on excess production capacity and other structural factors. Resource-based companies and parts makers counting on robust Chinese demand now face headwinds.

     Until fiscal 2014, China-related bankruptcies were seen primarily among apparel makers and other smaller businesses and caused mainly by rising wages and other costs, according to Tokyo Shoko Research. The trend is now spreading to larger enterprises.

     Declining Chinese demand dealt a big blow to Daiichi Chuo Kisen, a maritime shipper focused on transporting such resources as iron ore. The company filed for civil rehabilitation proceedings in September 2015 with about 120 billion yen in liabilities.

    Mid-tier trading house Emori Group Holdings filed for rehabilitation in April 2015 with total liabilities of about 70 billion yen. Emori had begun trading metals and minerals in addition to mainstay chemical products and had relied on China for roughly 70% of its sales. But it fell into trouble after failing to collect receivables from a distressed trading partner there.

     The smaller the company, the harder it tends to get hit. Teramachi, which built components used in the Hayabusa2 asteroid probe, went bankrupt in January. It made capital investments on hopes of greater demand related to construction machinery in China, but the orders did not materialize.

     Companies abroad are also feeling the heat. Thailand's Sahaviriya Steel Industries applied last October to begin its rehabilitation after cheap Chinese products flooded the global market. Many Chinese steelmakers are trying to make up for sluggish demand at home by boosting exports.

     Australia's Queensland Nickel went bankrupt this January on a drop in construction-material demand in China, the world's largest market for the metal.

(Nikkei)

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