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China’s Troubled Banks Get a Lifeline from Local Governments

  • Rural banks are selling shares and nonperforming loans
  • They need capital as bad debt increases and the economy slows
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Photographer: SeongJoon Cho/Bloomberg

China’s local governments are helping inject fresh capital into small lenders across the country, part of an expanding campaign to restore confidence in the world’s largest banking system.

At least 10 small Chinese banks have raised money this year by selling shares packaged with non-performing loans, in several cases to buyers controlled by local authorities. In at least one deal, the NPLs were sold at above-market rates.