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Wenzhou credit crisis

  • Published 06 Oct 2011

Executives are fleeing to avoid "usurious" lending rates within the region's shadow banking system.

A string of private business owners in Wenzhou, China’s entrepreneurship hub in southern Zhejiang province, have fled the region to avoid loan repayments (CC Sept 30 Update Alert). Total shadow – or private – lending in Wenzhou has reached Rmb 110bn ($17bn, £11bn, €13bn), or 20% of the city’s bank loans, with an average annual interest rate at 25.4%, almost four times the benchmark one-year lending rate of 6.56%. The phenomenon has sparked debate over stress in China’s vast shadow banking system.

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