China's crippled financial sector

But with the current regimen of credit austerity, imposed to contain economic overheating and inflationary pressure, making conditions for SMEs worse, the financial sector - the least reformed sector in China - now is suffocating the beating heart of the country's economic dynamism.

In normal times, the informal financial market helps SMEs to get by; but the recent woes of Wenzhou, a city in southern Zhejiang province renowned for its freewheeling private economy, have shown that the informal financial market can be very volatile and undependable. Several major lenders absconded with large amounts of deposits, and defaults by ordinary companies have become a serious concern.