Chinese Firms Turn to Pawn Shops as Loans Dry Up

(Source: Reuters, 19 Feb 2009)

With China's economy stumbling along at its slowest growth in seven years and banks wary of lending as defaults rise, small business operators are hocking belongings and company assets for loans from pawn shops.

"Banks are reluctant to lend," said Huang Jing, deputy business manager at Shanghai Oriental, the city's second-biggest pawn shop. "But we have a lower threshold and can provide loans much more quickly and with shorter terms".

From gold bullion to houses and factory equipment, customers are offering all sorts of assets to get loans from pawn shops. An auto dealer pawned his downtown apartment against a 4 million yuan ($585,000) credit line to secure funds for his business. A real estate developer gave his unsold properties as collateral to get an emergency loan while waiting to secure bank funds. And a construction company owner hocked his villa to get a loan to pay workers' salaries.

"This is your captain speaking, everyone remain calm, everything is under control. "

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