Usury Incident Reflects China’ Economy State
The recent Wenzhou usury incident unsettled many Chinese,
will this set off small and mid-sized firms’ financial crisis?
Experts analyze that this incident has exposed the complex
relationship of loan sharks and the problems of borrowing money.
They believe that the Chinese authorities are
hiding the true situation.
However, China is undergoing lots of Wenzhou-modelled
Since last year, China started implementing the monetary
policy, and the bank deposit rate has risen up to 21.5%,
private lending has become a main supplier to small firms.
Nanfang Daily reported that the Wenzhou model was used
as a test and example. Large-scale private lending
provides a new source of funding.
However, over 90 bosses couldn’t repay the loans and fled.
According to a survey on mainland private firms, 50% of
small companies’ funds in Wenzhou are from private lending,
89% of these funds are from families or individuals. Ca. 60%
of the enterprises participate in the private lending market.
Wenzhou’s official document shows that private lending
accounts for 1/5 of the bank’s loan.
CLSA reported that the total private outstanding loans in
Wenzhou went from RMB800 billion to RMB1000 billion.
Analysts estimate that 10% to 15% of outstanding loans will
turn into bad debts this year.
Wenzhou banking officials denied these numbers, saying that
the scale of private loans is not as high as CLSA’s statistics.
Jason Ma, an economic commentator, said that what
happened in Wenzhou also happened in other cities.
Jason Ma: “It happened in Wenzhou first because they are
going to extremes. Zhejiang province is the worst,
the private lending rate rose over 100%, the same occurred in
many other places, such as in Tianjin, Mongolia
and Shangdong. Many of our small and mid-sized estate
companies cannot repay the loans, so they have to flee."
Jason Ma points out that the Chinese Communist Part (CCP)
hides the true figures of the loans from the public,
particularly using it’s mouthpiece media to cover up the truth.
Jason explained that if you don’t see CCP media reporting it,.
that doesn’t mean nothing is happening, on the
contrary, a lot of things are happening in the dark.
Mainland economist, Qi Yanchen, said banks lend money to
state-owned companies, resulting in prevalence of civil usury,
so that the small and mid-sized companies suffer.
The private enterprises take the leading role
in China’s economy market, creating jobs and revenue. Qi
believes private enterprises should require government help.
Qi Yanchen: “The state monopolized finance,
and is the leading cause of today’s usury financial crisis,
the government has the responsibility to correct its mistakes."
The 21st Century Business Herald reported that
Inner Mongolia Erdos is easing the usury market
due to the risks of incurring the bad debts.
Shenzhen, Guangzhou and other cities are also alerted
of the risks. However, the loan interests are still rising up.
NTD reporters Liang Xin, Li Ting and Li Anan.