| China's Banks on the Brink of Disaster |
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| by Tom McGregor | Mon, Jun 29, 2009, 11:01 AM |
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According to the Daily Telegraph of London, "money is leaking instead into Shanghai's stock casino, or being used to keep bankrupt builders on life support. It is doing very little to help lift the world economy out of slump." For some time, Fitch Ratings has been warning that China's lenders are playing a dangerous game, yet its most recent report is even grimmer than bears had anticipated. The report is quoted as saying, "with much of the world immersed in crisis, China appears to be one of the few countries where the financial system continues to function largely without a glitch, but fitch is growing increasingly wary. Future losses on stimulus could turn out to be larger than expected, and it is unclear what share the central and/or local governments ultimately will be wiiling or able to bear." The phrase "able to bear" should be duly noted. Fitch's "macroprudential risk" indicator for China threatens to leap from category 1 (safe) to category 3 (dangerous). Some experts are surprised by the report, but Michael Pettis from Beijing University believes China's public debt may be as high as 50 percent to 70 percent of GDP when "correctly counted." The Chinese government feels so compelled to meet its 8 percent growth target that it has permitted banks an implicit guarantee for what Fitch describes as a "massive lending spree." Even as profits contract at a 35 percent rate, bank exposure to corporate debt has reached $4.2 trillion, while rising at a 30 percent rate. To read the entire article from Daily Telegraph of London, link here: This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
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Comments (1)
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written by Dr. Little , June 30, 2009 My. My. My....... And is this the same CHINA that has recently and loudly been suggesting that its very own national currency should become now the world's standard currency ? Is it a good idea to make the currency of a nation with banking problems like this the new "world's standard currency" ?? Say, that sounds sort of like one of the "wacky" ideas that an OBAMA speechwriter might "write up" for the old POTUS to read from a TelePrompter......... Are the CHICOM writing any of the OBAMA speech material ??? Write comment
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Fitch Ratings has been warning for some time that China's lenders are wading into treacherous waters. China's banks are on the verge of chaos. The half-reformed economy of the People's Republic would not be able to absorb the $1 trillion avalanche of new lending issued since December.
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