As in Thailand, under-capitalised small banks were over-extended, especially in property, and were hurt by the mounting cost of repaying foreign-currency loans.

ECONOMIST: And South-East Asia thinks it��s all over

This month China freed interest rates on large foreign-currency loans, and the government recently announced that it would liberalise local-currency credit within three years.

ECONOMIST: The longer march

Frills include hand-delivered cash and foreign currency, and tailored loans.

ECONOMIST: Plastic bank

They had access to subsidized foreign currency and low-interest loans from state-owned banks.

FORBES: Magazine Article

This contributed to banks' and industrial companies' over-reliance on short-term foreign loans, which could no longer be serviced after the currency collapsed last October.

ECONOMIST: Time to turn off the tap?

Even if inflation remained moderate, many firms as well as the government would default on loans, since 90% of government debts and 80% of private-sector debts are in foreign currency.

ECONOMIST: Keeping the reform alive | The