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July 2, 2013

Loan Practices of China’s Banks Raising Concern

Text message solicitations began arriving on the mobile phones of many of China’s wealthy last month, promising access to lucrative wealth management products with yields far above the government’s benchmark savings rate.

One message read: ‘China Merchants Bank will issue a high interest financing product starting from June 28th to 30th. The product will be 90 days with a 5.5% interest rate. Please call us now.’

A day later came another. ‘Warm reminder: The interest rate of yesterday’s product has been raised to 6%. (Product duration is 90 days). There is limited access to this product. First come first served.’

The offers are not coming from fly-by-night operators but some of China’s biggest banks. They are raising huge pools of cash to finance a relatively new and highly profitable sideline business: lending outside the scrutiny of bank regulators.”

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Read full New York Times article here

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