China’s $3 Trillion of Hidden Bad Debt Prolongs Economic Pain
View original at finance.yahoo.com“By any measure, Tom Hu should be in default on a $730,000 bank loan for his plastics business in China.”
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The Chinese economy is getting worse and many businesses are struggling; banks and borrowers both have incentives to hide bad debt to avoid credit blacklists and rising NPL disclosures
60% confidenceChina's banking leniency threatens to become a permanent drag on the world's second-largest economy by recycling capital into unproductive companies rather than productive ones
60% confidenceChina's official non-performing loan ratio is 1.5%
60% confidenceThere is no financial crisis, but there is no free lunch in economics. The price of China's loan forbearance is slower growth, inefficiency, and low productivity
60% confidenceSome analysts believe China's hidden bad debt could be double the $3 trillion estimate, implying up to $6 trillion in disguised non-performing loans
60% confidenceChina's true bad loan ratio is approximately 10%, implying roughly $3 trillion in loans that should be classified as past due are not
60% confidence
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