According to Ernst & Young, the accounting firm, bad loans in the Chinese financial system have reached a staggering $US911 billion ($1.18 trillion), including $US225 billion in potential future NPLs in the four largest state-owned banks.
This equals 40 per cent of gross domestic product and China has already spent the equivalent of 25-30 per cent of GDP in previous bank bail-outs.
This sounds remarkably similar to Japan in the 80's when everyone assumed they would take over the world. It took over a decade of a deep and painful recession to recover from the resultant collapse. Japan didn't have nukes and a large, restive population. Could be real trouble brewing in the next few years. |