Bejing,June,29: Global markets are eyeing over the Greece's debt woes, but the world second biggest economy China's debt situation is not that much different from Greece game.
Chinese banks are also witnessing pain in their books as the balance sheet of banks are not giving rosy picture because in there off-balance sheet lending, very few facts and a lot of fears is visible.
The amount of Chinese bank credit book has doubled from December 2007 to May 2011, which is the perfect textbook example of a credit bubble in the system.
Despite the fact that the loan growth rate in China has been halved to 15% over the last 2 years, the value of lending extended during that time which is prime concerns for them.
Total outstanding of Chinese bank loans stood at USD 6,500 per capita in 2010 with respect to GDP per capita of USD 4,400, which is not going to sustain in near future.
There is an overhang though of the excesses those were booked in the previous 2 years on the book of banks. When they mature over the coming 2, 3 years, the will certainly see defaults. In China non-performing loans (NPL), which at 1% of total loans, are bound to increase going forward.
Some analysts are even estimating that this could increase to 6% of loans, 10% of loans, and even 15% of loans within a few years’ time. However as per general consensus NPL of Chinese bank are inching to get double in 3 year.
The worsening situation in China will create big storm in world economy as China is not much transparent and once the bubble will burst will derail the global growth.
No comments:
Post a Comment