The People's Bank of China (PBOC) is moving to dismantle so-called "zombie banks" set up by local governments, but which have accumulated debts worth $3 trillion, most of it uncollectable.
The "financial vehicles" were set up by local governments to facilitate massive spending on public works when the Beijing government launched a huge stimulus package to help China overcome the 2008 global economic crisis. But, says the PBOC, most of the ersatz banks "have poor credit, ambiguous functions and unsustainable financial conditions."
