No Market Medicine for Wenzhou's Financial Jitters

Wenzhou bank executives recently complained that city government officials in this bustling commercial center were behaving like a drowning man clutching at straws.

"Sink or swim" is probably what the bankers would like to tell local officials.

But as the city struggles with a wave of defaults and factory shutdowns blamed on heavily indebted companies, and in the face of government penalty threats, Wenzhou's bankers have quietly complied with city hall orders to grant loan extensions and show clients flexibility when loans come due.

City officials want to ease what some say is a localized financial panic by setting new rules for banks as well as loan guarantee firms. They spelled out the action plan at a meeting with executives from seven banks October 11.