[photopress:nuclear_plant.jpg,full,alignright]The China Banking Regulatory Commission has announced that eight bank branches are to be punished for helping enterprises misappropriate credit loan. As well, the State-owned Asset Supervision and Administration Commission of the State Council punished two enterprises for misappropriating bank loan to speculate real-estate and securities: China Nuclear Engineering & Construction and China Shipping.
Although those eight banks are not all state-owned commercial banks, they have close connections with local government and large state-owned financial institutions. The two enterprises are large state-owned enterprises.
What this appears to suggest is that a slab of the money being used to overheat the stock and real-estate markets is government money.
The annual interest rate of a bank loan is 6% but the profit in real-estate and stock markets is many times that although there is, of course, a strong element of risk.
Seeking high gain rate with low cost is a very rational decision for a private company or an individual. The problem is that the funding of state-owned enterprise belongs to the state.
In order to prevent a large amount of bank loan flowing into stock market, the Banking Regulatory Commission in February issued a notice to banks warning them illegal misappropriation of funds.
Source: Editorial Hong Kong Economic Journal translated on Interlocals.net