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China Billionaires Beat Bank Crunch by Pledging Shares

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For billionaire Li Hongxin, getting a loan for his closely held hotel and chemical-engineering businesses became harder as Chinese banks tightened credit. His solution: raise the funds himself by pledging shares in his publicly traded company.

“Of course we’d like to borrow from banks to get lower interest rates, but banks are reluctant to lend to private businesses recently,” Li, chairman of Shandong Sun Paper Industries Co., China’s biggest non-state paper company, said in an e-mailed response to queries. “They have a lot of bad loans amid China’s cooling economy.”