April 4, 2005
Babu Ghanta
India Daily
The Dragon is shaking internally! China further revealed severe financial corruption. The Bank of China fired officials from its Beijing branch following the revelation of serious breaches in its credit controls. Several officials, including a deputy director of the business department, were removed after a local property developer used fake documents to borrow $77.9 million.
Chinese banks have loaned local business without any regard to underwriting principles. The private enterprises have grown enormously based on these loans without provisions for reserves and now they are unable to pay back even the interests. The default rates have skyrocketed and the Chinese officials are forced to investigate. In many cases the monthly payments have been made with further loans. The worst of all, many of the recent loans have been forwarded for bribes to the officials against fraudulent documents.
The Government owned Enterprises are also in terrible shape. They are outright losing entities with their financials in deep red. They are run by the loans from the Banks.
The local private and the central Government Owned Enterprises are in so poor financial condition, the experts are predicting a complete financial meltdown and collapse of Chinese economy.
The meltdown of Chinese economy may drag the Asian and the world economy with it. The expansion was so fast based on bad loans and lack of business experience, the boom has given rise to bust. The bust is quiet and may be kept under the rug by the communist regime for a long time.
http://www.indiadaily.com/editorial/2169.asp