China’s old bad loans still a problem

In Satyajit Das: Potemkin Villages – The Truth about Emerging Markets, Das asserts that China’s NPL problem from the 1990’s remains unresolved:

The historical background provides insight into China’s recovery from the 2008 crisis. Predictably, the State instructed the banks to lend vast sums to restore growth to target levels. Based on previous experience, the lending, much of it secured over land, will result in large NPLs (non-performing loans). In 1999, NPLs were 39% of total loans of Chinese Banks. Between 2001 and 2007, the major banks spun off $480 billion in bad loans into government sponsored Asset Management Companies (”AMCs”) to prepare them for initial public offering to raise capital. Most of these NPLS remain unresolved, being rolled over with Government guarantees indefinitely.

This is reiteration of a point made here in the past.


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