Private firms with good prospects get a helping hand

Commercial banks in Zhejiang province are taking innovative measures to help private companies with good prospects get through hard times, by exploring an interbank consultation mechanism under the guidance of local banking and insurance regulators.

More than five years ago, Zhejiang Mengna Socks & Hosiery Co Ltd provided a debt guarantee of 260 million yuan ($38.4 million) for Zhejiang Weihai Zipper Co Ltd, a former leading zipper manufacturer in China, under a mutual guarantee that aimed to help each participant receive bank loans without collateral.

Weihai Zipper went bankrupt in 2013, as its forceful business expansion into real estate development and deep involvement in mutual debt guarantee programs eventually led to capital chain rupture.