Hunan Xinwei Bags Company, a manufacturer of knapsacks and handbags, is struggling to survive. The Chinese economy is slowing. Wages are rising amid a shortage of blue-collar workers. And competition from countries like Vietnam is growing.
But what has really hurt Hunan Xinwei in recent months has been a credit squeeze facing small and medium companies all over China. Exorbitant interest rates and a scarcity of loans at any rate have turned the financing of everything from raw materials to equipment into a crippling challenge for businesses and individuals without political connections to borrow at regulated rates from the state-controlled banking system.
“The current monthly interest rate that people like me are paying is around 3 percent,” compared with just 0.5 a month for regulated loans, said Yin Haibian, president of Hunan Xinwei.
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