Chinese smartphone maker Gionee (金立) appears to have a cash flow problem. The company, which ranks number seven in the Chinese market in terms of production, has been accused by multiple suppliers of not paying for goods delivered. In mid-January, a court in Guangdong froze the shares of Gionee founder and chairman Liu Lirong, who holds a 41.4% stake in the company.

On February 6, supplier O-Film Technologies revealed that Gionee owes the company around RMB 626 million, and that payments are already two months overdue. O-Film has ceased delivering products to Gionee. In an interview with the Securities Times (link in Chinese), Liu Lirong told reporters, “The company is looking to sell assets in order to get through this crisis, but the debt owed to O-Film Technologies cannot be dealt with at present.”

It comes as a surprise to many that a company with such prominent branding could suddenly face a cash flow crisis. Gionee has sponsored sporting events, collected multiple celebrity endorsements and frequently appeared in commercial slots on popular CCTV shows.

This brand presence however, could have led to Gionee’s current situation. In his interview with Securities Times, Liu Lirong blamed his companies’ situation in part on overspending in marketing. He said the company spent over RMB 6 billion on marketing in 2016 and 2017.

Gionee is not alone in its exorbitant marketing budget. In fact, having more than one celebrity spokesperson is standard for the Chinese smartphone industry. According to a report released by Jinri Toutiao, JD.com and Counterpoint, Gionee uses comparatively few spokespeople, with only two in 2017. Of the major brands, Oppo had the most at nine celebrity spokespeople for 2017.

The report argues that such aggressive marketing campaigns are extremely important. They write, “The homogenization of mobile phone products has become more intense, which makes marketing all the more important. Media outlets have even said that the market has already gone from being ‘product driven,’ to now becoming ‘marketing driven.’”

Keeping up with marketing expenses can be difficult, especially in the current environment. As previously reported, the once booming Chinese smartphone market has finally begun to cool, with 2017  witnessing the first-ever annual decline in shipments, according to Canalys. Shipments were down 4% in 2017 and continued to fall in the first month of 2018 by 16.6%.

Canalys Research Analyst Hattie He argues that there is little room left in the market for smaller vendors. “The declining Chinese market will have a detrimental impact on those Chinese vendors that have been heavily relying on their home market,” she said. “It will affect their cash flow and profitability, limiting overseas expansion and bringing into question future survival. The threat to vendors such as Gionee and Meizu is now closer than ever.”

For his part, Liu Lirong insists everything will be fine. He claims that production and sales are going on normally at Gionee, and that all staff have been paid. “I will not run away from this. The debt will be repaid step by step. Jin Li is confident that it can solve this crisis.”