Caixin OnlineFinance & EconomicsTop Stories Finance Cash Crash for Wenzhou's Private Loan Network
10.11.2011 14:36

Cash Crash for Wenzhou's Private Loan Network

Everyone can win and everyone can lose in a Chinese city that plays a risky game of high-interest rate, private lending
By staff reporters Zhang Bing, Zheng Fei and Zhao Jingting

Dubbed the nation's capital of private financing, the city of Wenzhou offers a textbook example of how non-bank lending has fueled private sector prosperity – and risk-taking – in China.

A recent central bank survey said about 60 percent of all local businesses and the vast majority of households are interconnected through the city's private lending system.

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It's a tight financial network that interweaves lenders and borrowers collectively, often to their mutual benefit and sometimes to their terrible loss.

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