China’s “bad bank” debts from the 1990s are being paid off by the government, increasingly rapidly of late. What this means for China’s big banks depends on which perspective you come from. It’s arguably a rather good thing in the near-term.
What it means for the broader economy is more complicated. Read more
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