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Anjani Trivedi

China’s Banking Cleanup Needs a Bigger Mop

The Baoshang takeover suggests problems may be emerging at other small lenders.

The regulator’s here.

The regulator’s here.

Photographer: China Photos/Getty Images

China’s banking cleanup has moved into a fresh phase with the seizure of a small city-commercial lender. It’s far from clear that regulators have the right supplies to finish the job.

The central bank and the banking and insurance regulator are assuming control of Baoshang Bank Co. for one year because it poses serious credit risks, in the first government takeover of a lender in more than two decades. They’re bringing in state-controlled China Construction Bank Corp., one of the country’s largest lenders, to manage Baoshang’s business operations.