China’s rate reform may serve to shield indebted state firms

Reuters

China's decision last week to liberalize bank lending rates, though widely applauded, has raised suspicions that it reflects official concerns over possible loan defaults and is aimed at helping out heavily indebted state firms and local governments. China's central bank announced on Friday that banks could now lend at whatever rate they liked, enabling them to compete for new borrowers with cheaper credit at a time when the world's second-largest economy is slowing markedly.

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