Friday, September 23, 2016

Is China About To Face A Banking Crisis?

Source: China Daily/Si Wei

The Telegraph: Fitch reveals the $2trillion black hole in China's economy that heralds a lost decade

Bad debts in the Chinese banking system are ten times higher than officially admitted, and rescue costs could reach a third of GDP within two years if the authorities let the crisis fester, Fitch Ratings has warned.

The agency said the rate of non-performing loans (NPLs) has reached between 15pc and 21pc and is rising fast as the country delays serious reform, relying instead on a fresh burst of credit to put off the day of reckoning.

It would cost up to $2.1 trillion to clean up this toxic legacy even if the state acted today, and much of this would inevitably land in the lap of the government.

“There are already signs of stress that point to NPLs being much higher than official estimates (1.8pc), most obviously the increased frequency with which the banks are writing off or offloading loans,” it said.

Read more ....

WNU editor: For the past two years the Chinese businessmen that I know have been parking a good part of their wealth offshore, precious metals, or cash. They have consistently told me that the current situation was (and is) not sustainable .... that there is just too much debt and a day of reckoning will happen. Hmmm .... and it looks like it is starting .... Guangxi Nonferrous Metals is China’s first interbank bankruptcy (South China Morning Post). And while the Chinese government does have trillions in reserve that can offset such a crisis .... it is going to be huge hit that will impact everything. The economy, defense spending, social programs .... everything. As for the global economy .... especially those countries that are dependent on China when it comes to buying their  resources .... expect hard times.

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