Chinese Paper Giant Curtails Production Amid Debt Crisis

Chinese Paper Giant Curtails Production Amid Debt Crisis

Chenming Group, a prominent player in China’s paper-making industry, has announced significant production cutbacks across most of its facilities as it grapples with mounting overdue debts.

In its official statement, the company attributed its financial difficulties to declining product prices, especially in the white cardboard segment, caused by an imbalance in supply and demand within the industry. Additionally, tightened lending from financial institutions has strained the company’s cash flow, leading to unpaid debts, legal disputes from creditors, and the freezing of multiple bank accounts by court orders.

As of the announcement, Chenming Group reported a total overdue debt of CN￥1.82 billion (US$251.3 million), representing 10.91% of its total assets. The company also bears joint liability for CN￥574 million (US$79.3 million) in subsidiary debts. A total of 65 bank accounts linked to the company have been frozen, involving CN￥64.8 million (US$8.95 million).

Headquartered in Shandong, Chenming Group is a leading enterprise and the only company in China’s paper-making sector capable of integrated pulp and paper production. Despite its prominence, the company has faced financial strain since posting its first-ever profit loss in 2023, driven by weak demand and volatile raw material prices. Although the paper industry began to recover in 2024, Chenming continued to report losses, totaling CN￥710 million (US$99.49 million) this year, as well as heightened debt pressure, with debt ratio rising to 73.51%.

To alleviate its financial challenges, Chenming has pursued measures such as divesting shareholdings and subsidiaries since 2023. The company stated that it plans to broaden its financing channels and negotiate with creditors to explore alternative debt repayment solutions.

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