|That's right -- I'm here to audit your supply chain. (Yes, I know|
the movie's based in Japan, not China.) Credit: joblo.com
Hours after a creditor and his gang of tattooed thugs hustled Zhong Maojin into a coffee shop in Wenzhou, he says he wouldn’t yield to their demands. They wanted to take over one of the pharmacies in a chain he’d built by borrowing from private lenders. Instead, he made an offer of traditional retribution in this eastern Chinese city, known for loan sharks who have sometimes meted out violence to bad debtors. “If you like, you can cut off one of my fingers instead,” Zhong, 42, says he told them.
Giving up the store would have made it impossible to pay back another 130 creditors, Zhong said. He’d borrowed 30 million yuan ($4.7 million) at interest rates as high as 7 percent a month to expand the business. Many of the lenders were elderly neighbors who’d mortgaged their homes. At least 90 bosses in similar situations to Zhong have fled the city since April, and two killed themselves, according to Zhou Dewen, head of a small business association in Wenzhou. One was shoemaker Shen Kuizheng, who jumped to his death from his 22nd-story home on Sept. 21, he said.
Wenzhou’s 400,000 businesses are facing financial hardship because of rising costs, soaring black market interest rates and a sudden credit squeeze, Zhou said. Similar problems are happening across China because private enterprises in China rely on underground borrowing rather than banks to operate, he said.Bear with me for a moment here. This article focuses on the credit problems in one particular smallish city in Zhejiang, which is a coastal province in China. They make shoes and eyeglasses in Wenzhou, among other things. Perhaps it's just a problem in Wenzhou.
However, I believe (though I could be wrong) that the chemical manufacturing industry is quite strong in Zhejiang. What's the likelihood that this informal credit squeeze and the associated suicides, bosses fleeing and plant closings (which is popping up now and again in the media) is going to affect US chemical manufacturing and their supply chains? Of course, you have the official Chinese media telling people that "Zhejiang resilient to debt crisis".
Naaaaaah, couldn't happen.