January 8, 2016 By FTI Consulting
The global technology industry has a great dependence on China, with its key role as a manufacturer of consumer electronics. More recently though, China has seen its position change as an important consumer too, with tech stocks swinging up and down based on estimates of Chinese demand for iPhones and other gadgets. As growth in China dips below 7%, companies with exposure to China face two problems in 2016.
First, when pressures mount on directors to hit corporate profit targets, history has shown the emergence of fraud or accounting irregularities. Figures given in one quarter may come to be corrected or restated at a later stage.
Second, corporate debt in China stands at 7 times operating cash flow – more than double the level US, Japan, Germany and UK With official results for Q4 2015 looming, and many companies already weighed down by existing debt commitments, further debt for less accretive growth in 2016 will simply increase the size of the problem.
Each month, FTI Consulting takes a look at some of the most engaging topics in the Telecom, Media & Technology sector. This month’s insights predict what 2016 might bring in the form of cyber-security, consumer electronics, drones, and telecoms networks.