The Fall of D'Long

The scandal had a ripple effect that was felt not only across the entire group but also by the Chinese economy as a whole. It turned the spotlight on the rigid banking structure in the country and the banks, which did not extend loans to private corporate investors (Refer to Exhibit I for a note on financing private companies in China). With only limited sources of finance being available to them, several private companies in China resorted to obtaining finances through trusts and investment companies to run their businesses.......

The Chinese government, on its part, tried to bail out D'Long by providing loans amounting to US$ 1.8 billion.According to David Chen, former chief of Hartcourt Company's4, investment arm, "The government should take the blame. It's time for policymakers to consider why this has happened - lack of transparency for investors and lack of scrutiny into bank lending."5......