Loan guarantors are struggling due to an increasing number of defaults, threatening the flow of credit to small businesses that are the main employers and job creators in China, South China Morning Post reported. In Wenzhou, nearly 90% of loan guarantors have failed since the start of the credit crisis arising from the underground banking system. The city, dubbed the capital of China’s private businesses, had pinned hopes on the companies offering capital guarantee services to bail out small companies when Beijing allowed it to legalise the underground banks. At the end of last year, there were more than 8,000 licensed loan guarantors.
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