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European gloom causes credit squeeze

(China Daily)

09:25, December 12, 2011

A visitor inside the dome of the Reichstag, Germany’s parliament, in Berlin. Europe's sovereign debt crisis has led to a global credit seizure, forcing some multinationals in China to seek help from local banks to meet their funding demands. (Photo from China Daily)

HONG KONG / SHANGHAI - Concerted action by the world's biggest central banks to lower borrowing costs and boost the global economy amid the eurozone's worsening sovereign-debt crisis has failed to dispel growing concerns of a worldwide credit squeeze.

The latest reports of a pullback by lenders in Europe and, to a lesser extent, the United States, have sounded a clarion call for many multinational companies, especially those headquartered in France or Germany. They are now scrambling to locate other funding sources to finance their expansion plans in China, which remains one of the few bright spots amid the global gloom.

Some foreign companies are rushing to establish new, or bigger, credit lines with domestic banks, including the more aggressive non-State-owned lenders, and overseas banks with access to the large offshore yuan pool in Hong Kong. Others are making preparations to directly tap Hong Kong's offshore yuan capital market through bond issues. There are also those who have shown an interest in selling equities to Chinese investors on the proposed International Board of the Shanghai Stock Exchange, when it eventually begins trading.

Indeed, large and small companies around the world - ranging from international airlines, shipping giants, property developers, manufacturing conglomerates and even restaurateurs and wine sellers - are reported to be feeling the strain as European banks reduce lending in an effort to hoard capital and shore up their balance sheets.

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