As China Business Law Journal goes to press this summer, new figures suggest that China has overtaken Japan to become the world’s second biggest economy.
It’s a landmark, and while it had been widely predicted, the moment arrived more quickly than most people had predicted. The global media and their pundits have, naturally, offered comment. Some have said that the symbolism of the moment is greater than its true significance, as China’s real influence and dynamism outstripped those of Japan long ago. Others have observed that as the world’s number two, China will face even more pressure from other nations to play a political role commensurate with its new economic power.
Our coverage this month once again speaks of China’s new and evolving role in the world. In US lawsuits: Chinese companies, are you ready? on page 41, China Business Law Journal brought together lawyers from a top US law firm and in-house counsel from leading Chinese companies to discuss the problem of litigation in the US. Any Chinese company making acquisitions in the US will face a lawsuit sooner or later. But so might any company merely exporting its goods to the US, or doing any business there. That’s a lot of companies.
But in some ways, as we are often reminded, China remains different. In A transformation: corporate restructuring gains credibility on page 21, we learn that the kind of operational restructuring of failing companies which is commonplace in some other countries is still at an early stage in China.
Another characteristic is that the free flow of credit that Chinese companies have enjoyed in recent times has allowed them to put off difficult decisions about poor cash flow and failing products. Now that the easy cash is drying up, the day of reckoning for many businesses may be near. As our coverage explains, companies would be well advised to look at the restructuring options, and advice, available before throwing in the towel.
The article also looks at the debt restructuring that has taken place, as lenders who lent to companies in the good times in anticipation of an initial public offering were forced to restructure that debt when the prospects of an IPO disappeared. Now, as China settles into its number two spot, many lawyers and other observers are predicting that the capital markets are set for a busy period. Hotter capital markets might provide an exit route for some of the lenders that have held their nerve through the bad times.
