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Economy

The troubling truth behind China's banking 'recovery'

Falling bad-debt buffers and risky bets add a deceptive shine to earnings

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Hong Kong's securities watchdog on May 8 took the rare step of extending the trading suspension for China Huishan Dairy shares following an exodus of directors from the company.   © Reuters

HONG KONG -- These days in China, when banks are in no mood to dole out cash, the country's old-economy enterprises start falling like a house of cards.

Soon after China Huishan Dairy Holdings, late on bank payments, saw its Hong Kong-listed shares plunge 85% on March 24, a group of companies led by aluminium maker Qixing Group failed to make good on loans worth at least 7 billion yuan ($1.01 billion). The incidents resurrected memories of the downfall of state-backed Dongbei Special Steel Group, whose chairman apparently committed suicide in March last year, days before the first of the company's nine defaults.

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