We’ve been pondering for a while here how China might avert or delay a full-blown financial crisis (or worse). Or, if you want to put it in a different light, how China might make its growth sustainable.
Either way, cleaning up bad debts from a bygone crisis might be a place to start. Chen Long at the INET China Economics Blog has noticed something interesting happening with China’s big Asset Management Companies — the four “bad banks” that were created in 1999 to buy Rmb1.4tn of distressed assets at book value from the four big state banks — equivalent to about 20 per cent of their combined loan books, or 18 per cent of China’s GDP in 1998, according to this BIS paper. Read more