“Excessive credit growth in China signals the growing threat of a banking crisis in the next three years”, – reported in the statement of the Bank for International Settlements.
In its review of the international banking and financial markets, BIS said that the probability of a financial “heat” in China in rising – the gap between the increase in lending and GDP reached 30.1 in the first quarter. “The value above 10 signals that the crisis may cover the country in the next three years as China’s LED is much higher than the second highest rate (12.1 for Canada) and is the highest of the countries evaluated.”, – noted BIS experts.
Debt plays a key role in slowing China’s economic growth after the global financial crisis. Debt reached 255 percent of GDP in 2015, which was largely due to a sharp increase in corporate borrowing. Recall two years ago, outstanding debt was 220 percent. Meanwhile, China’s bank lending rose in August more than double compared to July, with most of the increase related to the high demand for mortgage loans.
The BIS also said that the debt service ratio – which measures the interest in relation to income – was 5.4, which is a “potential problem”. This underlines the risk of default, as many borrowers are unable to repay the loans. Some analysts argue that the weakening of the capital strength of banks increases the likelihood that the government may have to “upload” more than $ 100 billion.
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