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The eBearing News
October 19, 2005
China Huarong Acquires Guangxi Bearing
copyright © 2005 eBearing Inc.
State-owned Guangxi Bearing Factory (China) has been acquired by a state-run
financial bailout institution, China Huarong Asset Management Corporation (CHAMC, China).
The equivalent of a state-sponsored bankruptcy bailout, the move pulls Guangxi Bearing out of
deep financial trouble by taking over and paying off its creditors.
CHAMC was set up in 1999 to acquire the most deeply troubled and debt-ridden businesses,
keeping them operating and staving off unemployment. The CHAMC also serves to support China's
developing financial sector, rescuing at-risk financial institutions by paying off the
troubled business' nonperforming loans. The companies taken over are then shuffled
under the protective state umbrella of the CHAMC. Ultimately, the goal is to prop
up the business, give it a clean start, and maintain employment until it can be sold.
By paying off business' nonperforming bank loans, the Chinese government is also protecting
its banking industry.
Essentially, CHAMC is a state-sponsored acquirer of last resort and last resort source of funds,
equivalent to enforced bankruptcy. While smaller companies are often allowed to close down,
companies with large employment rolls and/or that support other state-run entities are prime
candidates for being saved by the CHAMC.
China has come under international scrutiny for the CHAMC's actions, many claiming it interferes
with the natural ebb and flow of business, particularly in poorly-run state-owned entities.
Many international financial experts argue China should be allowing bad businesses to fail,
even if they are state-run, and should allow overly-aggressive banks to suffer for making
bad loans.
International banking officials say CHAMC's bailouts encourage ever-riskier loans
by China's fledgling financial industry by removing the consequences of making bad loans. If
a badly-run company is on the verge of closing, and banks have knowingly made easy loans to
that company knowing its condition, the experts argue the Chinese government should not step
in with bailout packages for everyone concerned. Doing so only encourages more of the
same, they contend.
Established in 1966, Guangxi Bearing Factory is located in Yizhou City, northwest Guangxi.
The company currently employs more than 2,500 workers in the sprawling 320,000 square meter
facilities (3.4 million square feet). A smaller sister plant is located in Beihai City.
Guangxi Bearing manufactures YS brand bearings; deep groove ball bearings, cylindrical and
tapered roller bearings, and clutch release bearings. Guangxi claims production capacity for
standard sizes (17mm through 160mm bore) is more than 5 million sets per year.
The company's employment and production statistics, even for low-cost China, give some
insight into the problems it -- and now the CHAMC -- faces, becoming a viable operation:
Running at full claimed capacity of 5 million sets per year, the plant's production would then
be only 2,000 bearings per employee per year. Alternatively, manned by an average of 2.5 workers,
the company's claimed 1,000 pieces of production equipment are turning out only 5,000 bearings
each per year.
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- by Bruce A. Carr
from individual research,
tips and commercial sources.
Bruce Carr edited this content.
Copyrighted material; unauthorized reproduction prohibited.
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eBearing.com ... for everything that moves™
Entire contents Copyright © 1999-2011, eBearing Inc. All rights reserved.
eBearing.com and "... for everything that moves" are registered trademarks of eBearing Inc.
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