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Debt-laden absconder returns home after China pledges efforts to tackle Wenzhou debt crisis

10-11-2011 08:52 BJT

WENZHOU, Oct. 10 (Xinhua) -- A prominent business leader who fled the country amid a debt crisis in east China's Zhejiang province returned home on Monday after Premier Wen Jiabao promised to help private firms during the current liquidity crunch.

Hu Fulin, president of China's largest eyeglass manufacturer, the Zhejiang Center Group, fled to the United States from the city of Wenzhou on Sept. 21, leaving 1.5 billion yuan (236 million U.S. dollars) in debt owed to both Chinese banks and individual creditors.

Hu said upon arriving at an airport in Wenzhou that he hopes his company can overcome the current difficulties with the government's support.

According to Zhou Dewen, chairman of the Wenzhou SME (small- and medium-sized enterprises) Development Association, more than 90 private entrepreneurs have gone into hiding in recent weeks to avoid repaying high-interest informal loans.

Local businessmen said the Wenzhou debt crisis was caused by difficulties in borrowing money from banks, as well as soaring production and labor costs. A shoe factory owner facing "debt problems" jumped to his death last month.

During a visit to Wenzhou on Oct. 5, Wen asked banks to lend more money to small firms and tolerate higher levels of debt. He also requested a crackdown on the high-interest informal lending market.

A spokesman from the Wenzhou municipal government said it has worked with industry associations to persuade fleeing businessmen to return home, while pledging that the government will give its support in tackling the debt crisis.

Chen Derong, vice governor of Zhejiang province, pledged that the government will ensure Hu's personal safety, as well as that of his assets.

"The government will provide support to help companies that are trapped in the financial crunch but have the ability to survive these difficulties," Chen said.

Hu said it had required "painstaking effort" to develop his company to its current size after founding it in 1993, adding that he will not give up the company if there is hope of saving it.

The company employed more than 3,000 workers and turned out products worth 270 million yuan last year.

Authorities estimate that the fleeing company heads owe more than 10 billion yuan (1.6 billion U.S. dollars) in debt to individual creditors pooled from the informal lending market.

The Wenzhou debt crisis is an extreme case of small- and mid-sized private companies struggling to survive the liquidity crunch resulting from the country's current macroeconomic control policies, which have been designed to cool inflation and rein in the runaway property market.

Wenzhou's robust private sector has allowed it to make a name as one of China's wealthiest cities. The city's 400,000 private firms contribute to more than 90 percent of the city's gross domestic product.

Yang Xiaoping, director of the Zhejiang bank regulation commission, said on Monday that the commission has taken a series of measures to encourage banks to issue loans and optimize financial services for SMEs to help them weather the debt crisis.

 

Editor:Zhang Rui |Source: Xinhua

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