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China launches 'triangle debt' probe

By Wang Xiaotian and Du Juan  (China Daily)

08:08, August 27, 2012

Problem said to be most serious in industrial, manufacturing sectors

The State Council has ordered a major probe into the level of debt owed between companies from the private and public sector.

It has now instructed some ministries to see how widespread the problem is, and to find out what risks it poses to the economy as it continues to slow, according to a senior official at the China Banking Regulatory Commission.

When a default occurs between one party and another because a third party can't or won't pay, it is often known as a "triangle debt".

Senior industry experts said they consider a growing problem does exist, particularly in the under-pressure industrial and manufacturing sectors, where many companies are suffering falling levels of business.

The CBRC source said various ministries are involved in the investigation, and will have to submit reports to the State Council.

They include the National Development and Reform Commission, the central bank, the State-owned Assets Supervision and Administration Commission, the Ministry of Industry and Information Technology, and the Ministry of Commerce

The Beijing-based Economic Information Daily reported on Friday that the State Council's attention was drawn to the potential problem by a report written by its think tank, which noted that companies were facing rising difficulties in collecting loan repayments, and that the incidence and levels had been rising steadily.

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