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China may have $1.3 trillion of risky loans, IMF report shows

Section: Daily Dispatches

Another reason for devaluation.

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From Bloomberg News
Thursday, April 14, 2016

China may have $1.3 trillion loans extended to borrowers who don't have sufficient income to cover interest payments, with potential losses equivalent to 7 percent of the country's gross domestic product, according to the International Monetary Fund.

Loans "potentially at risk" would amount to 15.5 percent of total commercial lending, the IMF said in its latest Global Financial Stability Report. That compares with the 5.5 percent problem loan ratio reported by China's banking regulator after including nonperforming and special-mention loans.

The true amount of bad debt sitting on the books of China's banks is at the center of a debate about whether the country will continue as a locomotive of global growth or sink into decades of stagnation like Japan after its credit bubble burst. Hayman Capital Management's Kyle Bass in January flagged a $3.5 trillion potential loan loss for China banks, though analysts from China International Capital Corp. and Macquarie Securities Ltd. have said that estimate overstates the real situation. ...

... For the remainder of the report:


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