Thursday, August 25, 2016

Is China's Super-Bus a Scam? - Bloomberg View

Investors taken for a ride on the Transit Elevated Bus

"The bus bust has thus become a symbol of a different -- and far more damaging -- kind of Chinese ingenuity. The TEB's promoters promised investors 12 percent returns on their money, despite the fact that the prototype bus seemed likely to tip over, couldn't clear most urban bridges and wasn't tall enough to accommodate most vehicles underneath it. They could get away with it in part because those kinds of numbers are par for the course in China's P2P lending industry, which averaged returns of 13.3 percent in 2015.

Demand for such loans has exploded in recent years, growing in volume from $4.3 billion in 2013 to $71 billion in 2015. The appeal is twofold. First, China's big state-owned banks have traditionally focused their attention on other companies in the state sector, at the expense of consumers and small businesses. A budding entrepreneur, or a young couple looking to pay for a wedding, often had to rely on the goodwill and deeper pockets of friends and family, loan sharks and, more recently, unregulated "shadow" lenders that specialized in expensive, short-term loans."
Is China's Super-Bus a Scam? - Bloomberg View

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