China Credit Crunch Reveals Greater C2FO Opportunity

The New Yorker's recent article, "The Gift of Doubt, Albert O. Hirschman and the power of failure," by Malcolm Gladwell, inspires thoughts on the current business challenges in China. The article delves into the economic philosophy of the late economist Albert Hirschman, whose work examined whether ignorance impedes or is a precondition to progress. Hirschman's study of a thirty-two year odyssey in railroad construction led to his belief that creativity is borne of necessity rather than desire.

The article describes that during the mid-nineteenth century, a five-mile mass called the Hoosac Mountain blocked passage between the Deerfield Valley and a tributary of the Hudson, posing a significant challenge to railroad builders. Beset by miscalculations, political roadblocks and inefficient drilling methods, construction of the Hoosac Tunnel would eventually exceed its budget tenfold. Had they fully grasped the situation at the outset, the funders would never have undertaken this Herculean task. However, once engaged, the imperative of success spawned creative thinking and ingenuity that led to completion of the longest U.S. railroad at the time, contributing to the overall rapid industrial growth of the country.

According to Hirschman, "the only way in which we can bring our creative resources fully into play is by misjudging the nature of the task, by presenting it to ourselves as more routine, simple, undemanding of genuine creativity than it will turn out to be."

In the case of the China credit crunch, such ignorance has led to an economic system that is broken. The situation of unregulated shadow banking, combined with higher borrowing rates and the inability for many companies to obtain funding, has created a macroeconomic crisis condition where new thinking is required. It is the equivalent of being mid-way through the mountain before realizing the tools at-hand will not complete the task. It is an opportunity for the C2FO Market to provide a transformative solution.

The credit crisis in China has created an imperative for SMB and global Fortune 1000 companies to think more creatively about achieving cash flow efficiency, without resorting to shadow banking, factoring, and supply chain financing. Constant static and "less-than dynamic" discounting methods are not economic tools of the modern age.

Instead of borrowing the same money at increasingly higher rates, or being restricted to limited accounts receivable advance rates and excessive fees, C2FO provides an open market system that gives all businesses the opportunity to access their cash from their customers in a more efficient manner. This means lower cost, less friction and more flexibility. C2FO is the economic trans-continental railroad of our time and a tipping point for China's businesses to transform their financial system. C2FO is working capital made easy.