The People’s Bank of China ‘s Shanghai branch has warned commercial bank lenders about the risks involved in extending credit lines to octopus-like company groups.
In a first-of-its-kind report released July 31, the central bank cited two examples of credit abuse by unnamed groups, although Caijing has learned that the questionable borrowers were China Pacific Construction Group and Heibei Baoshuo Co. Ltd. The central bank’s Regional Financial Stability Report said sheer size enables a group to exert significant influence over a local economy, industry development and tax revenues. As a result, banks tend to vie for group business. [Full Text]