Apparently I missed this little account on Zhongwang in my earlier post (read here). Zhongwang disclosed in the footnotes of its 2009 annual announcement (read here) it borrowed RMB2.3billion from two Liaoning banks and gave it to a local government construction entity. The company claims it is not on the hook to repay the debt (read here).
This is another example of poor corporate governance in China. As local governments are prohibited from borrowing debt, this is also an example of how local governments get around this policy restriction. Perhaps more importantly, as this article points out (read here), how will this continue as central government clamps down on various 'shadow lending' schemes?
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