Wenzhou Private Lending Shrinks Amid Debt Crisis


Wenzhou, China’s entrepreneurship hub in southern Zhejiang Province has seen a remarkable drop in private lending since last year's credit crunch which caused dozens of local business owners to flee.

The city’s private lending declined 30% while both individual-to-individual and individual-to-enterprise loans dropped more than 50% from last August, according to a survey by local regulators.

Over 800 lending agencies, including 6 registered financing guarantee companies had been closed by the end of March.

Legal problems concerning private lending disputes had been on the rise too with the Wenzhou Court accepting over 22,000 those cases since last August, an average of about 100 each day.

About 100 debt-ridden business owners in the city fled in the wake of a credit crunch that has cut off the only source of funding for many private companies last November.

Wenzhou's SMEs (small-and-medium sized enterprises) which are very common in the city, have long turned to private lending for funding, as the government prefers to lend to large, state-owned enterprises.

As the city’s credit crunch developed into a more severe crisis, the Chinese government in March announced plans to set up a pilot zone in Wenzhou to accelerate its financial reforms by allowing residents to invest abroad and encouraging private investment in local financial institutions.


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