Question-and-Answer Session
Operator
(Operator Instructions) Our first question comes from the line of [Rick Fearon, Accretive Capital Partners].
Tony Shen
How are you, Rick?
Operator
Please proceed.
Rick Fearon - Accretive Capital Partners
Yes, first for taking the call, I appreciate it. I had a question about the capitalization of the company and it does seem like at the moment the company is being funded by majority of short-term financing and yet most of the company's assets are fixed assets, the long-term assets.
And I was curious if there is any effort to restructure the balance sheet so that the financing more closely matches the assets of the company. It just doesn't seem like its makes lot of sense. There is plenty of equity value, but the financing is mostly short-term. Why is that?
Tony Shen
This has to do with specific situation in banking industry in China. Chinese banks like to have very short-term loans for companies, because at every renewal they can (inaudible) have the opportunity to adjust the terms based on -- depend government policies. This can be good or bad for the company, but in our past this has been mostly good, because especially now, China is following most of the industrialized countries in lowering its interest rates to stimulate the economy. So in every renewal, we get a lower interest rate.
Of course, to match along -- your idea is more idealistic. In a perfect world, we should match the assets and the liabilities. And in our specific situation now, we only have a very small portion of the borrowings in long-term, but just based on our experience with dealing with the banks we had never had a problem in renewal in most of the credit facilities.
Rick Fearon - Accretive Capital Partners
Okay.
Tony Shen
So maybe we should call them the short-term to long-term borrowing, but in short form.
Rick Fearon - Accretive Capital Partners
Okay.
Tony Shen
Yes.
Rick Fearon - Accretive Capital Partners
And the company -- is it in any jeopardy of shifting any financial covenants or are there financial covenants with the Chinese banks?
Tony Shen
Yes, there are. In fact most of the banks have very similar requirements, for example, your revenues cannot be declining more than a certain percentage from quarter-to-quarter et cetera. But we have never had any breaches of such covenants, and in our observation, in China banks rarely enforce their covenants. Except when the company is already clearly in trouble.
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