Spooked by defaults, China banks begin retreat from risk
Published on Mar 26, 2014 11:21 AM
BEIJING (REUTERS) - Some of China's struggling firms are finally getting the reception that regulators have been hoping for - a cold shoulder from banks in the form of smaller and costlier loans.
Reuters has contacted over 80 companies with elevated debt ratios or problems with overcapacity. Interviews with 15 that agreed to discuss their funding showed that more discriminate lending, long a missing ingredient of China's economic transformation, has become a reality.
Up against a cooling Chinese economy and signs that authorities will not step in every time a loan goes bad, banks are becoming more hard-nosed and selective about whom they lend to.
There are signs that even state-owned firms, in the past fawned over by lenders for their government connections, have to contend with higher rates, lower lending limits and more onerous checks by banks.
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