China detains Wenzhou exec in city's debt crisis: report

Reuters News
|
Posted: Feb 05, 2012 8:24 PM
China detains Wenzhou exec in city's debt crisis: report

SHANGHAI (Reuters) - Police in China's eastern province of Zhejiang have detained a Wenzhou educational company boss for allegedly failing to repay large debts, the official Shanghai Securities News reported on Monday, the latest fallout from a credit crunch in the entrepreneurial hub.

Wenzhou became emblematic of China's hidden local debt problems last year that surfaced after Beijing began to clamp down on credit as it battled inflation, leading some private firms to borrow money on underground markets that pool money from individuals and firms -- at annual interest rates as high as 100 percent.

Local media reported that at least 80 business executives from Wenzhou had declared bankruptcy, gone into hiding or committed suicide because of financing problems.

Police detained Dong Shunsheng, chairman of the Wenzhou Liren Educational Group and froze the firm's assets, the newspaper said.

The company had earlier announced that it owed debt of about 2.2 billion yuan ($349 million) to about 1,000 people, the newspaper said.

In an effort to help cash-stricken businesses meet their financing needs, China's Premier Wen Jiabao visited Wenzhou in early October, telling banks to lend more to small firms and tolerate high levels of bad loans from them, while demanding a crackdown on the high-interest underground lending market.

(Reporting by Lu Jianxin and Jason Subler; Editing by Ken Wills)