China’s corporate cash crunch is going to hurt. Analysts at Macquarie this week carried out a more sophisticated version of my study on the Beyond Brics blog, and came to similar conclusions. “The combination of slowing cash generation and rising financial leverage is increasing credit risk in the system, and hence for the listed banks,” they said.

The past year's slowdown in bank lending is a big part of why these issues have been exposed. When the credit tide is high, liquidity is plentiful. But when it goes out, it can leave an unpleasant stink.

Cash flow problems can be symptomatic of deeper problems in the structure of a business or excess capacity in a sector. In that case, fresh credit only delays a reckoning. But, if the problem is a disruption in exports, or a short-term dip in domestic sales – which could be the case for many Chinese companies – then the support of lenders becomes crucial.