The captains of commerce in Wenzhou borrowed to bet on continuing growth.
"This isn't just about Wenzhou; they're just the ones who came down with the fever first," said Patrick Chovanec, a professor of economics at Beijing University. "What is the fever? You borrow based on growth continuing, not decelerating. So if [growth] goes down to even 9 per cent, people go bust."
When growth slowed, first the banks cut back on loans, so the bosses went to the pawn shops and loan sharks to borrow at higher rates to keep things going and to pay off older loans, then everyone started to call in their loans and credit disappeared.
"It was very similar to the collapse of Lehman Brothers in the U.S., it spread so quickly," said Mr. Huang, who is more than $2-million in hock himself.
Now, over 100 'bosses' disappeared overnight, on the lam from creditors.
I love a train wreck...especially theirs.
Now if only cold fusion were real.