Coronavirus credit crunch hits millions of Chinese firms

Mounting debts have hit Chinese companies struggling to pay workers and suppliers amid the coronavirus outbreak.

President Xi Xinping said on Sunday that China faces a "big test" to combat the virus.

The government has asked banks to offer more credit for an economy stunned as the virus spreads rapidly.

But a survey of small and medium Chinese firms found millions on the verge of collapse.

The Chinese Association of Small and Medium Enterprises said around 60% could cover regular payments for only one to two months before running out of cash.

Only 10% said they could hold out six months or longer.

At the same time, the industry group said that "nearly 60% of the enterprises (surveyed) have resumed work."

Small- and medium-sized companies in China are a particular focus because they account for 60% of the economy and 80% of jobs, according to the People's Bank of China.

Many of the firms and their workers have been on an extended break since late January when China extended the week-long Lunar New Year into mid-February and travel within and to and from the country was slashed to combat the spread of the virus.

International Monetary Fund Managing Director Kristalina Georgieva at weekend meeting of the world's top 20 economies, known as the G20, capped warnings echoed by central banks around the world that China, the world's No. 2 economy, will see a sharp fall in first quarter economic growth.

The IMF's current baseline scenario sees China's economy returning to normal in the second quarter of the year. "But we are also looking at more dire scenarios where the spread of the virus continues for longer and more globally, and the growth consequences are more protracted,'' Georgieva said.