interestrateripoff Posted September 18, 2013 Share Posted September 18, 2013 http://www.bloomberg.com/news/2013-09-17/china-developer-s-20-loan-after-bank-rebuff-signals-risk.html China property developer Zhang Fuguo was rejected by banks for a loan to help keep building two office towers in the central city of Zhengzhou. So he turned to a manufacturer of water and gas meters.The 50 million yuan ($8.2 million) loan last month at a 20 percent interest rate will help Zhang pay workers and buy materials and was like “delivering coal on a snowy day,” he said. It was less so for one board member at lender Henan Suntront Technology Co. (300259), who abstained from approval on concern that Zhang’s company would fail to repay the debt. So-called entrusted loans, in which banks are “entrusted” with funds as middlemen between companies, increasingly grease the wheels of China’s economy, withstanding a crackdown on shadow banking this year and rising to a record 293.8 billion yuan in August. The increase was part of a surge in non-bank credit that may add to default risks threatening Premier Li Keqiang’s efforts to sustain 7 percent expansion this decade. “The more that we have financial activity taking place in the shadow-banking system, under the current regulatory standards and regime, the more risky that it is,” said Louis Kuijs, chief China economist at Royal Bank of Scotland Group Plc in Hong Kong. China is going to have a nasty collapse at some point. The pressure is clearly on the builder now to finish and sell off the buildings otherwise he'll get crippled by the debts. Quote Link to comment Share on other sites More sharing options...
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