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Wenzhou Bosses Default on Loans and Flee – Will a Subprime Crisis Erupt in China?

On September 27, 2011, China Review News published a short article to introduce a series it is publishing on “China’s subprime crisis.” Heads of companies are becoming runaway bosses because they are unable to pay hundreds of millions in debt. For example, Hu Fulin, the owner of China’s most popular sun-glass company, recently fled from Wenzhou, the “capital of China’s private manufacturing companies,” to escape his debts. Recently, a “List of Runaway Wenzhou Bosses” has been circulating on the Internet and has caused quite a stir.

“Some analysts believe the incident indicates that a crisis exists in Wenzhou that may affect hundreds of billions in private loans. With the continuous deterioration in the chain of repayment of private loans [Ed: As banks favor SOE’s, banks make loans that are not on the books or borrowers turn to underground sources at higher interest rates, creating a chain of loans] quite a large number of enterprises may collapse. For the banks that originally made these private loans, the funding chain is getting longer. Once the enterprises, the loan borrowers, have business problems and cannot repay the loans, the original banks will be in trouble and more economic entities will be affected. Therefore, a subprime crisis may erupt in China.”

Source: China Review News, September 27, 2011