People's Daily urges Chinese firms to deleverage

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Chinese newspaper the People’s Daily highlighted the importance of the real economy in China, and called for risk prevention from financial leverages, in an opinion piece published Monday.

It also spotlighted several Chinese business giants, including Dalian Wanda, LeEco, and China's four biggest banks, that have been on the front pages of Western media outlets.

For one, Chinese Internet giant LeEco has frequently appeared in domestic and foreign media outlets for its recent financial woes.

The People's Daily, the flagship newspaper of the Communist Party of China, portrayed the Internet giant LeEco as a company that “tells stories in exchange for funding in order to survive.”

People's Daily's economic column on August 14, 2017.

Elliott Zaagman, who used to be in charge of a culture and globalization program in LeEco's human resource department, told CGTN the company ran itself as a large startup, but ended up trying to do too much too quickly.

The company's founder and former chairman Jia Yueting resigned from the post in July, and suppliers of the company's mobile arm have surrounded the company's building demanding for loan payments.

Leshi, the Shenzhen-listed arm of the company said it estimated a loss of some 96 million US dollars in H1 due to declining revenues affected by its parent company's cash crunch.

After criticizing LeEco for "telling stories in exchange for funding", the piece went on to say "an era which uses a concept to create high estimated value should end."

Zaagman admitted that mistakes were made, but defended Jia to be a good person, even as LeEco went through many rounds of retrenchment and resignations.

"It's definitely not an easy time," he said.

Talking about the massive coverage of LeEco from the media, Zaagman said, “I think that there have been a lot of accusations of active malice or active deceit on part of Jia Yueting, and I definitely do not think that that is the case."

Jia Yueting, founder of LeEco, unveils an all-electric battery "concept" car in Beijing, April 20, 2016. /Reuters Photo

"I do not think that it was because Jia Yueting was trying to trick people, or trying to run a scam," said Zaagman. "There has been a lot of negative things that have been said."

The piece also mentioned how China's largest real estate developer, Dalian Wanda, has been focusing on asset reduction and de-leveraging since 2015, with its sale of 77 hotels and 13 cultural and tourist programs.

The piece further doubted whether the public should be really happy about China's four biggest banks making the list of the world's top 500 firms, adding the lenders should consider how to better serve the country's manufacturing sector instead.

The piece also said companies' dependence on high leverages and high debt ratios to barbarically grow a company has come to an end.

"The real economy is the foundation of today's prosperous economy," it says, asking people to pay attention to the National Financial Work Conference in July, which urged the financial sector to better serve the real economy, and continue to de-leverage the economy.

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