This entry was posted on 1/5/2010 11:08 AM and is filed under uncategorized.
Liu Mingkang, the chairman of the China Banking Regulatory
Commission, is worried. He should be. Any banking system that just delayed
recognition of non-performing loans issued in the mid-1990s until 2019 has
problems. But it is gets worse. The large banks have repackaged $88 billion in
loans and sold them to Chinese trust companies. Sounds like securitized
subprime to me. Also the Chinese banks will raise as much as $73 billion from
capital markets next year.
In other words, the Chinese banks are adding to their
balance sheets to keep the wall of loans going. Worse, the money keeps going to
the wrong place. Since the beginning of the recession it is estimated that
China has lost about 20% of it small to medium sized businesses. And another
20% have barely scraped by. These are the most productive and the largest
employers in the economy. As you know, the loans went and will continue to go
to the state owned industries which are dumping their products on every market
and provoking worldwide trade problems especially with India.
