Chinese banks ' practice of cross - selling loans to each other is storing up problems in the country 's financial system . At least 28 companies in Dongying city in Shandong province are trying to restructure debts mainly because of defaults on loans made to other businesses . Private companies in China usually need significant loans or guarantees from other companies before state banks will lend to them . The Dongying government’s finance bureau did not respond to a request for comment. This distribution of debt across Chinese companies raises the prospect of systemic problems in the financial system , with two Dongying banks already hit by a sharp rise in loan defaults .
Chinese banks ' practice of cross - selling loans to each other is storing up problems in the country 's financial system . At least 28 companies in Dongying city in Shandong province are trying to restructure debts mainly because of defaults on loans made to other businesses . Private companies in China usually need significant loans or guarantees from other companies before state banks will lend to them . This distribution of debt across Chinese companies raises the prospect of systemic problems in the financial system , with two Dongying banks already hit by a sharp rise in loan defaults .