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China's outgoing premier Wen Jiabao seems to have struck a sentimental note in his closing remarks at the NPC (China's parliament). This is completely normal but what is a bit surprising is that he pretty much admits China's system of financial intermediaries is dysfunctional. According to Caixin he said:
The problem is that companies, especially the smaller ones, need huge amounts of capital but, banks can't satisfy them. Meanwhile, the market is awash with private capital seeking opportunities."China's state-owned banks pay negative real rates to depositors, while funneling capital to strategic
industries chosen by the political leadership. Thus they create a vacuum on both sides and this causes the emergence of "private financing", which is a death-sentence crime, as a young entrepreneur, Wu Ying, found out earlier this year.
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