More than half of borrowing and lending disputes adjudicated at Shenzhen's Middle Court over the past two years were brought by state banks looking to recover unpaid commercial lending. This remarkable statistic was published last week by the Shenzhen Economic Daily. The special economic zone (SEZ) newspaper revealed that in 1997 and last year the mainland's big four state commercial banks filed 734 cases with the Shenzhen court, seeking court injunctions to force loan payments involving 670 million yuan (about HK$625.51 million). More instructive, still, about half of the law suits were unable to proceed due to the unlawful nature of the original loans. While such disputes represent only a fraction of the SEZ's total loan business - Shenzhen short-term lending last year amounted to 116.21 billion yuan and medium and long-term lending reached 19.8 billion yuan - the number and nature of the court petitions reflect the monumental headache the mainland faces changing the credit culture at its largest commercial banks. Much of the problem, the newspaper said, originates with the fast and loose style in which lending business has been conducted, even in one of the most sophisticated and presumably street-smart cities in the country. Examples cited included executives who lack proper authorisation borrowing money in the name of companies then placing the funds in personal bank accounts; and local credit co-operatives ignoring due diligence to lend to business associates who lack necessary collateral. Many of the funds, one Shenzhen court enforcement officer told the newspaper, were simply squandered in bad investments. Other funds were squirrelled away by corrupt officials. A report in yesterday's Beijing Morning Post cited a People's Bank of China (PBOC) official as saying as much as one trillion yuan of the six trillion yuan held in mainland individual deposit accounts was originally loaned to companies and institutions. 'It's true for every bad borrower there is a bad lender,' said Goldman Sachs senior economist Fred Hu Zuliu. Mr Hu worries that as the mainland's four recently launched asset-management companies wrestle with reducing the Big Four's heavy portfolio of non-performing loans - exchanging billions of yuan in debt for questionable assets - the bureaucracy-driven credit culture that allowed the lending to take place in the first place remains intact. In recent months, the central bank has attempted to compel reluctant enterprises to repay their bank debts by publishing regional blacklists naming bad borrowers. According to the central bank's terms, listed companies were given one month to contact creditor banks and negotiate measures to pay outstanding lending and interest. A blacklist of 105 enterprises published in June by the PBOC's Guangzhou branch, for example, resulted in dozens of companies repaying and renegotiating their loans. Mr Hu said more needed to be done to improve regulatory supervision and commercial bank responsibility. A co-ordinated approach could be useful. 'First and foremost property rights need to be clarified and protected. That would include enforcing commercial lending agreements with court-backed liquidations if needed,' Mr Hu said.