Article: Economist “Bamboo Capitalism”

While you can get it for free it’s worth popping over to the Economist for their article entitled “Bamboo Capitalism”


The full article can be found at

Here’s an extract? http://www.economist.com/node/18332610?story_id=18332610&fsrc=rss

It would be much better if they tried instead to provide the entrepreneurs with a proper legal framework. Many entrepreneurs understandably fear such scrutiny: they hate standing out, lest their operations become the focus of an investigation. But without a solid legal basis (including intellectual-property laws), it is very hard to create great enterprises and brands.

The legal uncertainty pushes capital-raising into the shadows, too. The result is a fantastically supple system of financing, but a very costly one. Collateral is suspect and the state-controlled financial system does not reward loan officers for assuming the risks that come with non-state-controlled companies. Instead, money often comes from unofficial sources, at great cost. The so-called Wenzhou rate (after the most famous city for this sort of finance) is said to begin at 18% and can even exceed 200%. A loan rarely extends beyond two years. Outsiders often marvel at the long-term planning tied to China?s economy, but many of its most dynamic manufacturers are limited to sowing and reaping within an agricultural season.

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