Eleven work groups have been sent to oversee a bank bailout of private firms suffering from a liquidity crunch in a coordinated move to tackle the Wenzhou debt crisis.
This cane a week after Premier Wen Jiabao visited Wenzhou and asked local authorities to stabilize the situation within a month. Hundreds of company owners in Wenzhou have fled in the first nine months of the year due to inability to pay their shark loans.
A spokesman with the provincial government said yesterday that 25 banks in Wenzhou have pledged to increase lending to bolster private firms to weather the debt crisis, Xinhua News Agency reported.
By the end of September, at least 228 local company bosses had fled this year, a rise of almost 42 percent from the same period of last year, according to a research paper by the Zhejiang government.
Those runaway bosses left 75.93 million yuan in unpaid salary to 14,644 employees, the paper said.
By yesterday, three of more than 90 private entrepreneurs who had gone into hiding in recent weeks to avoid repaying high-interest informal loans returned home, Xinhu said.
Among the three, Hu Fulin, president of China's largest eyeglasses manufacturer, the Zhejiang Center Group, is the biggest debtor. He fled from Wenzhou to the United States on September 21, leaving 1.5 billion yuan in debt owed to both Chinese banks and individual creditors.
The business community in Wenzhou said the local debt crisis is an extreme case of small- and mid-sized private companies struggling to survive the liquidity crunch resulting from the country's macroeconomic control policies, which have been designed to cool inflation and rein in the runaway property market.
Under the government's coordination, banks now also have increased their lending ratio to small- and mid-sized enterprises.
Industry associations have also taken measures to help. Zhou Dewen, chairman of the Wenzhou SME Development Association, told Xinhua that his group has prepared an emergency fund worth 900 million yuan to help private firms in urgent need of cash.
He said about half of SMEs in Wenzhou have difficulties in borrowing from banks and are forced to obtain capital from the unofficial lending market.
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