China’s economy

Hitting the kerb

A squeeze on lending hits China’s entrepreneurial heartland

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Readers' comments



Why doesn't the central bank legitimize local lending/investment? It would end the driver for the property bubble.


There is a very common misconception that China is beginning to get rich and BEGINNING to become a vast, booming commercial empire. The truth of the matter is that for more than a thousand years, China's trade and currency has been top-notch (since this notion was introduced of course). However, their trends for most economical factors has been rickety. Despite this they have always gotten back to top. For the past 200 years, since the US was founded, China has been having a rough spell. Now, it should come to no surprise, that like always, they will make their way to the top through countless different strategies that I cannot even begin to comprehend.

This article on China's "credit crunch" is slightly misleading because despite increased inflation rates and downward trends in economic reforms, the country still is rapidly picking up its economy. China's lending fee is so high because the nation is not only keeping itself in check, but also many other countries. Through this mutual communication with other countries, its relations become stronger, which helps in the long run. Whatever it sinks down on, it will get back in the long run. With a strong central government, inflation is a small price to pay for its fast-paced economy and increasing number of foreign customers. All this talk of a lagging economy is not looking at the overall picture that shows China becoming more financially stable and stronger with each day.


The local government should not be encourage to save and therefore bailing out these mindless SMEs who are bent on expansion to produce the cheapie goods for exports. Instead the money should be better spent on improving the livelihood and social security net for ordinary folks.


The solution is called chema daytrader (facebook), it is very likely to become one of the best traders in the world has just 21 my opinion...greetings traders


China's economy when looked at from an outside perspective, especially from a competitive American stand point, seems all well, vibrant and sturdy. However things are not always as they seem. Based on this article it seems as though the chinese government is pretending everything is fine and trying to hush their economic problems in order to keep their current noble economic standing in the global community. When in reality they like most of the world right now, may be having some difficulty and entering into a bit of a recession.


I totally agree. China is in a very unique state economically. The smallest economic decisions can have tremendous (or minute) affect on others. I feel as if the taxi cab example represents this very well. There are externalities being felt by the Chinese society as this economy continues to grow and develop. I feel like China will enter a small form of recession due to this informal lending as well.


The lending seems to be a way that is turning China towards a small recession. This could be critical if china continues these lending agreements. Someone made a point about the electrical and oil consunptions, although i do not have scientific numbers it would make sense to assume that with average increase in one thing directly related to another would tend to increase the production of the other. Using this theory to say increased lending leads to increased oil and electrical consumption.


China is having a bit of a little recession considering their slowdown in exports to Europe and worrying spate of bankruptcies among small enterprises. China will overcome this little issue though, because they always seem to be doing fine. If their solve their inflation and lower their overpriced living expenses they should be fine. As long as they get their exports back up all will be good.


Many small investors and small lenders probably get their fingers burned when putting money into these SMEs as they frequently do creative accounting on top line and bottom line numbers. Many are just swindling the public and investors and thus tend to create a bad reputation at home and abroad.


China is growing in nearly every economic and political aspect possible. Through this increasing power they are able to spread their influence across the entire globe – especially South America. China may be experiencing some problems – a slowing of exports and an increase in bankruptcies – in their growth, but they are not enough to stop the positive growth altogether. These problems are just slowing down the rate at which China’s economy is increasing.

China gets most of its money from improving already existing technologies. Although they do come up with some of their own products, the majority of their GDP is based off of improving other countries’ products. They are incredibly good at it, too. The fact that the countries China exports to are not buying as much is a bit of a problem because of this. They cannot utilize the products they improve if they cannot resell them.

China has developed a smarter and more efficient way to borrow and lend money. Once this program really takes off, it will bring a boost in the economy that will bolster everything else. This will not fully solve the problem with creditors and borrowing and/or lending too much, but it will be an improvement for sure. Small businesses are where a lot of large companies – not to mention the government – rely on for these loans and other financial business. If they can catch a break, it will benefit the entire economy. One way this can be done is to rise wages. This is currently under-way but may be a long time before it actually takes effect.


SMEs that export and which have no capitals for scale of operations, innate innovative abilities, no brand, no internal market are a liability to the Nation as all they do is nothing but sweat shops that only create more trade frictions but no profits.

They should be long shutdown because they are a danger to the financial health of the country as Bubbles and Crisis are formed whenever there are mindless expansion, bank over-lending due to over optimism.


Overlending and overborrowing of debt to deliver the perception of real growth... sounds like a repeat of the West's mistakes to me.


Those who would consider China a rich country should maybe take a look at their GDP per capita PPP.



Oct 25th 2011 3:36 GMT

China: Rich. That's probably what most people will get out of when talking about the economy of the country with the most people in the world. Their economy hitting a small bump should not be concluded as a huge recession as the entire globe economy is on a shaky boat. Crafty businessmen like the mentioned taxi drivers are actually just the normal tricks people in Asia use to gain more profits (as I am Asian as well).

Share taxi is a excellent business idea. A new innovative business idea is to group people online to share taxi. A new economy in HK is happening.




The growth chart looks like an impulse response, maybe someone can build a transfer function and find out how the engineers running the country decide their next policy.


China is getting rich extremely fast. However if they do not take lessons from Companies and countries in the past they will hit a recession. Greed in situations like this always leads to people lending out more money then they actually have.


Most of the SMEs in Wenzhou should probably shutdown shop as they can hardly makes any money from export with the rise in input costs like Yuan rise, labour, material etc.

The smarter ones would have move their operations to the inner provinces so as to concentrate on the more sustainable consumption in local markets.


Its good to see that China is in fact human. There is no way this is going to bring China into a recession; however, It will indeed slow down their rise to global power. Small road blocks like this are going to inevitable in a roaring economy, but no matter how you look at it the future of China's economy looks strong. As shown by their genius and innovative cab drivers, China is a force to be reckoned with. It will be interesting to see how China's economy rebounds from this situation, and how its going to affect its future growth.



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