In Wenzhou – dubbed the capital of China’s private businesses – nearly 90 per cent of loan guarantors have failed since the start of the credit crisis arising from the underground banking system, according to the media. As SCMP reports, although their services are critical for the economic system and the millions of small firms – that provide the majority of the mainland’s jobs – hundreds of loan guarantee groups are creaking under the weight of bad loans and are simply unable to bear any more. “It could become the last straw that breaks the camel’s back,” exclaims the head of a local law firm, “without the privately owned small businesses, China’s economy won’t have a future.” But PMIs are up so everything’s fine?
As The South China Morning Post reports,
Mainland loan guarantors have found themselves ensnared in the woes of the underground banking sector following a fresh wave of bankruptcies around the country.
Creaking under the weight of bad debts, hundreds of guarantee groups would be unable to bear even more, although their services are critical for the economic system and the millions of small firms that provide the majority of the mainland’s jobs.
“It is by all means a risky business,” said Wang Xiao, a Zhejiang entrepreneur who invests in a loan guarantee business. “An increasing number of loan defaults will soon force us to close down the business.”
In Wenzhou, nearly 90 per cent of loan guarantors have failed since the start of the credit crisis arising from the underground banking system, according to the media.
