The bank regulator in a rust-belt Chinese province has urged regional lenders to roll over maturing loans to struggling coal and steel companies, a policy that cuts against the Communist party's pledge to shut down "zombie” enterprises.
Investors widely assume that Chinese banks keep lossmaking companies on life support by rolling over maturing loans, often under pressure from local governments. But it is rare for a government official to acknowledge the practice.
The admission could also inflame criticisms of China by trading partners who argue that state-directed bank loans and other subsidies have enabled cheap Chinese steel to flood global markets, driving competitors out of business.
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