Credit crunch squeezes private business
- Source: The Global Times
- [20:53 June 02 2009]
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Nangang Shoe Factory in the city of Foshan, Guangdong Province has been closed down since October 24, 2008. Reportedly it will merge with Nanping Shoe Factory. Photos: CFP
By Yin Hang
Standing alone in his empty factory, the 35-year-old entrepreneur found himself at a loss about what to do to save his business.
Two years ago, Wang Bin’s metal-pressing factory was in full swing, 100 migrant workers hammering away.
Wang needs cash, and Wang needs it now. But sudden, new and increasing capital flow problems have seen Wang suffering sleepless nights as well as losing big bunches of his bushy black hair.
“The current situation has driven me crazy,” Wang told Shanghai-based Xinmin Weekly. “In this kind of macro-economic environment, most banks are cautious about investment.
“It’s hard for us to get enough money to run the business.”
It’s harder and harder for smaller businesses like Wang’s to borrow money from State-owned commercial banks under tightening banking policies caused by global credit crunch.
The squeeze on official sources of capital has created a booming private market for lending all over China, according to the Beijing News.
China’s private lending market is estimated to be worth about 2 trillion yuan ($292 billion) a year, and it’s often the only source of credit in rural areas. Its growth has consistently been constrained by its underground status.
Some provinces have been carrying out pilot policies to bring what can be described as either small-loan companies, private banks or venture capital companies in from their cold, illegal, underground world and help sate soaring demand for investment.
The city of Wenzhou, where Wang started his business, is known as one of the world’s fastest-whirring economic engines manufacturing clothing, shoes and electronics in Zhejiang Province. About 90 percent of the market players are small companies, according to Nan Feng Chuang (Window of the South).