Surging bad debts amid a large-scale credit crunch has companies reeling in Zhejiang province, a cradle of mainland private enterprise. In the key city of Wenzhou, non- performing loans nearly doubled to 18.1 billion yuan (HK$22.03 billion) at the end of June from 9.4 billion yuan at the start of the year, the China Daily said. The bad-loan ratio for Wenzhou jumped to 2.69 percent of total loans, compared with 1.33 percent in January and 0.37 percent a year back. "Around 615 large-scale industrial enterprises posted a [first-half] loss of as much as 1 billion yuan, up by 49.3 percent year on year," the paper said. Hangzhou, another key city, fared no better as 600 leading private enterprises applied for an instant bailout from the provincial government in the face of huge loan repayments due this month, the 21st Century Business Herald said. A provincial finance official confirmed the report, saying non-performing loans have been on the rise since October. "Bad-loan ratio [province- wide] rose to 1.43 percent from 0.93 percent at the start of the year," he added. The 21st Century blamed the crunch on the unique borrowing model in Zhejiang, with up to 70 percent of firms guaranteeing loans for each other. A leading furniture company in Hangzhou has 10 billion yuan worth of connected loans from 23 banks and financial institutions, involving as many as 100 connected firms, the report said. It is crunch time in coal-rich Shanxi province as well, as major businesses and private miners turn to the underground banking system that charges interest of up to 50 percent after commercial banks refused to grant them loans. This comes as overseas investments lose steam. Foreign direct investment in the mainland last month was US$12 billion (HK$93.6 billion), down by 6.9 percent year on year. That is part of a first-half fall in FDI of 3 percent from a year back to US$59.1 billion. This site contains materials from other clearly stated media sources for the purpose of discussion stimulation and content enrichment among our members only. whatsonningbo.com does not necessarily endorse their views or the accuracy of their content. For copyright infringement issues please contacteditor@whatsonningbo.com
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