Never before have China’s companies had so much cash and so little to spend it on.
With investment opportunities sparse amid the country’s weakest economic expansion in a quarter century, Chinese firms reported an 18 percent jump in cash holdings during their latest quarter, the biggest increase in six years. The $1.2 trillion stockpile -- which excludes banks and brokerages -- grew at a faster pace than in the U.S., Europe and Japan, according to data compiled by Bloomberg.
While there are worse problems than having too much cash, China Inc.’s unprecedented hoard is frustrating both policy makers and investors. Because companies lack the confidence to spend on new projects, government attempts to boost growth by pumping money into the financial system are falling short. Stockholders, meanwhile, would rather see bigger dividends or share buybacks than a buildup of idle cash on corporate balance sheets.
“This is actually becoming a bigger and bigger issue,” said Herald van der Linde, the Hong-Kong based head of Asia Pacific equity strategy at HSBC Holdings Plc. “Cash is becoming a point of debate.”

The impulse to hoard instead of invest is relatively new for a country where corporate risk-taking has been rewarded for much of the past 25 years. But as economic growth moves deeper below 7 percent from double-digit levels just a few years ago, the change in mindset has been stark. Growth in China’s private spending on fixed assets, which topped 10 percent last year, slowed to 2.8 percent in the six months through June, the weakest level on record.
“The drivers aren’t there” for Chinese firms to invest, said Sean Taylor, chief investment officer for the Asia Pacific region at Deutsche Asset Management in Hong Kong, which oversees about $803 billion globally.