Guangzhou (CNS) -- Faced by dropping orders and squeezed profitability, small and medium-sized enterprises (SMEs) in south China's Guangdong Province have to start industrial transformation. The SMEs, in urgent need of money, are vulnerable to credit fraud.
The weighted average interest rate of private loans in Guangzhou in the first half of 2011 reached 18.5%, and the interest rates of over 60% of the small lenders are more than twice as much as the benchmark interest rate, according to the Guangzhou Municipal Economic and Trade Commission.
Meanwhile, China's central bank has tightened its grip on the size of lending, which further limits the sources of financing for the struggling SMEs.
Over the past few years, the Guangzhou Municipal Procuratorate has worked on four cases concerning the crime of relending loans at high interest rates, which involve six suspects, and seven public prosecutions against 10 suspects, with the amount of loans totaling 755 million yuan (118.96 million USD).
Mr. Zhong, a leather tool businessman in Renhe Town of Baiyun District, signed an unsecured loan of 450,000 yuan (71,004 USD) with a bank at Pearl River New City in Guangzhou not long before. He was told that he had to pay an account management fee but the amount was not specified, so he assumed that he would have to pay up to hundreds of yuan per month, just like the fees of credit cards.
To his surprise, he was charged with an administration fee of 4,275 yuan, almost twice as much as the monthly interest of 2,706 yuan. Zhong has to pay an extra 50,000 yuan to pay off his entire debt, equivalent to an interest rate of 17%.
He is worried that the bank will mess up with his credit record if he complains about the fee and requests a refund, said Zhong.
