Thursday, February 20, 2014
http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10638811/Chinese-bank-bad-debts-hit-crisis-level-high.html
As growth rates are considered to be one of the most important benchmarks to view the performance of an economy, we forget to look at some underlying factors which show the performance of an economy. According to this article, China’s non-performing loans given out by banks have reached approximately $97 Billion and even though just this just makes up 1% of the total loans, the number is increasing. If this number keeps rising, there is a possibility of a credit bubble which could cause China’s economic outlook to tumble in the coming years.
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It is interesting that this article mentions the formations of a credit bubble in China and how it can be misleading. The current housing bubble in China is also very alarming though from the outset it may look like good economic growth. With the recent real estate boom, investors are building and expanding new towns and centers that are unoccupied as the prices are much too high. But when the bubble bursts and property values plummet, many investors will soon become penniless.
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