Article Abstract:
Chinese banks are seeking changes in bankruptcy legislation which they argue provides more protection for debtors than for creditors. Interest rate levels have little impact in China since little attention is paid to loan repayments or investment returns. State banks are receiving less money from China's central bank and are using depositors' money for loans. There is more pressure on them to deal with bad debts, but managers do not have enough training to assess who should qualify for a loan.
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Article Abstract:
Most observers are skeptical about whether China's new State Development Bank can get adequate financing from legitimate sources and limit lending to its mission. The bank, almost a year old, was launched to fund large state projects with long payback periods, such as the $30 billion Three Gorges Dam. It has committed to increase its agricultural-sector loans by 25% in 1995. Moody's Investors Service is considering whether to rate it as sovereign credit risk.
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Article Abstract:
Financial reform is set to be implemented in China, but this process may prove too slow. Bad debt is rising rapidly, bank officials are unable to obtain the necessary information to make informed lending decisions, and the country's capital markets remain underdeveloped. Direct foreign investment has declined significantly, and is not likely to rise again while China and the region still have overcapacity in almost all industries.
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