Long-Term Investment of Enterprises and Credit Safety of Commercial Banks——A Case Study of Power Generating Industry
Zheng Nan-le · Jinrong luntan · 2007
Systemically, our commercial banks do not have risk-sharing arrangements and direct control over long-term credit on macro-level. As the main channel for enterprises to seek fund to make long-term investment, commercial banks are adversely affected by credit insecurity. Power generating industry, as a typical example, borrows heavily long-term and short-term loans. Based on a data analysis of the annual reports from 29 listed power generating firms during the period of 2000~2004, it is proved that power generating industry is insignificantly affected in their investment, financing and production activities by the changes of day-to-day facilities-utilization rates and sales profit margin as reflected in their general balance sheet and short-term debt burden, whereas new fixed assets projects which depend much upon banks' loans can not help improve their balance sheet or reduce their short-term debt burden. This findings show that lack of alternative project financing channels results in excessive risk transfer of long-term investment from power generating industry to commercial banks.