Fwd: follow-Up on Wenzhou

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> More on China's countereconomic city:
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> <A
> HREF="http://reason.com/archives/2011/11/17/wenzhou-a-town-built-on-failure">http://reason.com/archives/2011/11/17/wenzhou-a-town-built-on-failure
> </A>
>
>
>
>
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>

China's formal banking system is controlled by the government, though I
think some are nominally private but receive Fed like capital credits via
China's central bank.

There seem to be a lot of banks controlled or owned by lower levels of
government, provinces and cities. Probably some by large industrial
organizations, perhaps on the order of credit unions.

Ultimately the central bank controls overall money supply, or tries to.
They try to allocate credit formally but I think that has broken down via
corruption and intermediary lending.

It looks like most of the Wenzhou lending is private. An economic downturn
will hurt that segment but should quickly normalize as failing businesses
are liquidated.

China's official lenders (like many Asian governmental controlled banks)
try to prop up politically important businesses or keep bankrupt enterprises
afloat via essentially, Solyndra type bad loans.

Lending capital will be more efficiently written down and redeployed (and
hence directed towards profitable borrowers with real economic prospects) in
Wenzhou and similar places than in the bloated state subsidized sectors.

That is the real difficulty in gauging Chinese economics, sorting out the
crony capitalism and politically connected stuff from the other. This is
particularly important during downturns.

I've read some reports which claimed that a huge percentage of Chinese
state banking loans are bad. Of course these are official "state secrets" so it
is hard to tell.

MH</HTML>

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