Foreign enterprises usually have higher asset-liability ratios. According to the National Bureau of Statistics, in 2006 their assets totaled 7.711 trillion yuan ($1.01 trillion). Enterprises' debts include bank loans and account payable to suppliers-if they can't pay their bills, both banks and suppliers will suffer severe losses.

Keeping an eye on South Korea

In May 2005, a South Korean computer corporation declared bankruptcy. Its subsidiary company in China's Shenyang, Liaoning Province left $50.49 million in bad debt involving four large Chinese banks, as well as a large amount of payments owed to Chinese suppliers. In addition, many South Korean investors abandoned their plants in China and fled back home, leaving many bad debts behind. Based on this experience, China must pay attention to the impact of the current financial crisis on its banks and suppliers.

Since the subprime mortgage crisis began in the United States in late 2007, the South Korean foreign exchange market and asset market have experienced turbulence. The Korean won has weakened against the U.S. dollar and renminbi, while the country's credit rating has declined. People inside and outside South Korea believe the country might experience a debt crisis similar to that in 1998. South Korea is one of China's top trading partners. In 2007, South Korea was China's sixth biggest trading partner, sixth biggest importer and fourth biggest exporter. By the end of 2007, South Korea had money in 46,582 projects in China, more than 7 percent of all foreign investment projects. Total South Korean investment was valued at $38.775 billion, representing 4.9 percent of total foreign investment and making South Korea China's sixth biggest investor. Because South Korean enterprises have taken on more debt as they develop in China, some have high asset-liability ratios. Therefore, there is a high risk that the current crisis in South Korea might infect China through South Korean enterprises in China.