A lending crisis is brewing in the eastern Chinese province of Zhezian, after more than 20 company bosses have fled in recent weeks, leaving millions of dollars in unpaid loans linked to unofficial lenders.
Three of the runaway company heads each left more than 1 billion yuan (US$156 million) in loans unpaid, according to Zhou Dewen, chairman of the Wenzhou SME (small and medium-sized enterprise) Development Association.
Businessmen have been forced to turn to private lenders for help in the wake of tighter central government loan policies introduced late last year to fight inflation. The higher interest rates that are demanded by the underground lenders can become particularly onerous when the businesses do not run as well as expected.
Money from government officials has been found to be involved in many cases of illegal loans to business owners who are now fleeing the area after finding they are unable to pay back the money, Xinhua news agency reported yesterday.
