Chinese firms see demand slump

Chinese auto dealer Dah Chong Hong Holdings amassed so much inventory this year that it would take 63 days to sell all of its Bentleys, Toyotas and Isuzus, up from the 42 days’ supply it carried in December. For rice wine maker Shanghai Jinfeng Wine Co, a 14 per cent inventory rise plus slowing demand means it would take 22 months to clear stockpiles at current sales pace, as against nine months at the end of last year, data shows.

As China’s economic growth cooled to a three-year low, inventories swelled with consumer firms such as auto dealers, food makers, liquor companies and department stores, according to an analysis of balance sheets from 350 Chinese companies. The bloated inventory complicates Beijing’s efforts to shore up growth as it prepares for a once-a-decade government leadership transition later this year.

About one in three consumer firms recorded inventory growth of at least 10 per cent between December 2011 and June 2012. Dah Chong Hong’s $296.5 million jump was the largest sum in the sample of companies examined. “Resolving inventory problems will have to take two to three years to see the results and it’s impossible to see a major effect in a couple of months,” Kim Jin Goon, executive vice chairman of a sportswear company said.

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