Understanding China, One Blog at a Time

An American in China

Chinas Bubble Bursting, Financial Woes

Posted by w_thames_the_d on April 29, 2012

Chinas day is coming. Single party dictators are only good at taking cash, sending their seed overseas and then imploding.
It is estimated that outstanding private loans in Ordos top 200 billion yuan (US$31.7 billion). But underneath the dreams of fortune, a crisis has been simmering.

A major case erupted Sept. 20, 2011, when Su Yenu turned herself in to the authorities for being unable to repay 1 billion yuan (US$158 million) of debt owed to the some 4,000 private lenders. The scale exceeded the previously largest case involving a person named Shi Xiaohong, who owed 740 million yuan (US$117 million) of private debt.

The defaults on private loans may spread, along with the downturn of the realty market, caused in part by government’s policy to curb unbridled speculation. Feng Guangyuan, an economist, estimates that 80% of funds for the realty development projects in Ordos come from the private sector. With the downturn of housing prices and stagnant housing sales, bosses of realty firms cannot repay their private debts, tying up huge amount of private funds. In September, 2011, Ordos government forbade legal representatives of 17 realty development firms owing over 1 billion yuan of private debt from leaving the city.

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