China is pouring money into the economy. But the gush of credit - banks doled out $540 billion of new loans in January and February - is not reaching nimbler private companies. That is worrying, since they generate 80 per cent of the jobs in China's cities and 60 per cent of gross domestic product.
A Reuters analysis of Chinese listed companies that have reported 2015 earnings show their suppliers owe them - and they in turn owe customers -more money that at any time in the last decade. It takes listed firms almost 170 days to turn working capital into cash. It took just one month in 2006.
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Listed companies are larger and better connected than their unlisted peers, and often have access to state-bank funding, so the mounting backlog hits smaller outfits hardest.
China's official Purchasing Managers Index (PMI) survey reflects this stark disparity. It shows large companies are still expanding, but smaller and medium-sized peers are bearing the brunt of the economic slowdown. The PMI score for small firms fell to 44 in February 2016 from 48 a year earlier, even further from the 50 mark that separates expansion from contraction.
As ever in China, there are workarounds. For one, small businesses can turn to peer-to-peer lenders for cash, paying higher prices for bridging loans while they wait for customers to pay them. Reflecting this trend, the P2P business is booming. Overall P2P loans - a figure that includes other categories such as consumer lending - shot up in the first two months of the year to hit 243 billion yuan ($37 billion), versus 69 billion for the same period in 2015, according to data provider Wangdaizhijia.
Alternatively, if customers pay with bills of exchange, entrepreneurs can take these to the bank and trade them in at a discount for ready cash. This is increasingly popular too. Such discounting is now being done with 46 per cent of all bills of exchange, up from 20 per cent at the end of 2013, according to research firm CreditSights. That is the highest proportion since monthly data began in 2011.
However, both fixes are expensive and eat into profits. That just adds to the pain of the struggling small businesses which China needs to create jobs.
