It is not surprising we find more frequently factories closing down over night, and down payments of our customers lost for ever.
"Private lenders operating out of pawnshops and credit agencies in Wenzhou charge small businesses three times official bank lending rates, even as Premier Wen Jiabao touts financial reforms in the coastal Zhejiang province city.
So- called shadow banks demanded 21.6 per cent on loans in April, according to the first private- loan survey published by the central bank’s Wenzhou branch. While that is down from a high of 25.4 per cent in August, it compares with 7.6 per cent on commercial bank loans. According to the Shenzhen Development Bank is Wenzhou the City with the worst Non-Performing-Loan-Ratio in China."
Cash ridden suppliers often see no other chance as to resolve to loan sharks in order to keep their production running, or finance raw materials for new orders. The outcome of such interest monthly interest rates are purely suicidal and reflect the cash situation of many smaller factories in China. It is to be expected, that the collection of the debts by the loan sharks are enforced in a tough way and often the only solution for the creditor is to disappear to an other province with his family overnight.
Source: South China Morning Post, Hong Kong