Most Westerners probably haven’t heard of Zhejiang, much less know where to find it on a map. But it’s likely that the clothes that you wear, the toys your children play with and your partner’s sunglasses are all made in this province located on China’s southeast coast.

But the economic success that has attracted investors here risks turning sour. Dozens of businessmen unable to pay off loans have fled the area and are now missing. The Chinese media, meanwhile, is speculating over whether a situation similar to the subprime mortgage crisis in the United States might be emerging.

The most dynamic city in this province is the city of Wenzhou. And, although it’s far smaller than the capital – and about 1,500 kilometres away – property prices there are similar to Beijing. The reason is simple – many private business owners have invested large sums of money into property here, which has pushed up real estate prices.

Soaring property prices in China have certainly upset at least one friend of mine, who sold his property in Beijing to go and study overseas about five years ago, only to watch prices in the capital soar five-fold while he was away.

Following this experience, he has been pressuring his Zhejiang-based parents to enter the real estate game. They are entrepreneurs, and owned a motorcycle accessories firm that employed dozens of workers. But they are far from alone in being tempted to enter the property market rather than investing in expanding their own businesses.

Under my friend’s advice, they sold off their business and rented out their factory. According to them, rising property prices and rents in the area mean they earn more from renting the property out than they would have earned from the motorcycle business.

However, since last year, the government has started to tighten bank lending. Zhejiang’s small- and medium-sized businesses are finding it difficult to obtain bank loans. And, with tighter property loan regulations, many are adopting a wait and see attitude.

All this means that many of those who hoped to earn big money from real estate are starting to get nervous as they are unable to sell their properties. This in turn has prompted the emergence of underground banks and loan sharks. Unable to borrow from official channels, private business owners have to borrow money at sometimes outrageous interest rates.

Over the past month, local media has reported on dozens of people who have fled because they couldn’t meet their loan repayments, while two more committed suicide by jumping to their deaths. A list of those who have disappeared has been posted at Wenzhou airport and other public places.

My friend’s parents are lucky – they didn’t get involved with loan sharks. But they have also seen the rent from their factory space tumble. And they aren’t the only ones – Wenzhou and Zhejiang are far from the only places outside Shanghai and Beijing to be seeing this phenomenon.

Chinese officials are warning that this country could be facing its own version of the US subprime crisis. It’s easy to see why....