Chinese City Regulating Private Loans

Extracted 03OCT2011 from

(Reuters) - The Chinese city of Wenzhou, an entrepreneurial city in the eastern province of Zhejiang, has set a legal threshold for interest rates on private loans, taking its first step to regulate the rampant underground loan market.

...Outstanding private loans in Wenzhou have climbed to 110 billion yuan ($17.2 billion) this year, up from 80 billion last year, according to central bank estimates, and are now the focus of local media reports about a wave of bankruptcies.

The China Securities Journal cited a July report published by the People's Bank of China branch in Wenzhou which estimated that 89 percent of households and 60 percent of companies in the city were engaged in private lending, charging rates of nearly 25 percent a year.