Reading Between the Lines

From the Shanghai Daily: Wen urges banks to support small businesses in trouble.

PREMIER Wen Jiabao has called for stronger financial support for China's small businesses and better regulation of the private lending market.

"Small enterprises should be a priority of bank credit support and enjoy more tax preferences from the government," Wen said during a visit to Zhejiang Province, east China's economic hub, on Monday and Tuesday.

He told banks to lend more to small firms and tolerate high levels of bad debt, while demanding a crackdown on high-interest private lending, Xinhua news agency reported yesterday.

Tolerate high levels of bad debt?

What kinda idiot tolerates high levels of bad debt? The whole purpose of banking is to make "good loans" not "bad ones".

One can read between the lines. The shadow banking system in China consists of private lending. If you trawl through the news items lately, you will read about a spate of suicides inside China.

There is incredible stress within the system.

China is going to have a very hard landing, and anyone that can't see that and keeps stoking the "China miracle" story is pretty much a fool.