Boston, MA -- (SBWIRE) -- 11/10/2012 -- BMI View: China's State Council announced in late March that it would launch experimental financial reforms in the city of Wenzhou, where rampant underground lending practices resulted in a localised credit crunch in late 2011. We view the government's attempts to formalise these lending practices as a positive sign, which could help alleviate capital shortages for small and medium-sized enterprises. Deteriorating credit conditions economy-wide, however, continue to drive our bearish stance towards banking equities. In a recent statement, China's cabinet said it would set up a pilot project in the city of Wenzhou, Zhejiang province, to establish rules and regulations for 'private lending' - the term for informal networks of money lenders that have developed outside of China's state-dominated banking system. These private lenders in Wenzhou will be encouraged to establish legal 'investment management organisations' the statement said.

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