Victor Shih, a political scientist at Northwestern University who studies the local debt problem, says the banks are reacting to poor returns on their investments in everything from real estate to subway lines. “Banks’ focus now is to use existing credit to ensure loans don’t go into default,” says Shih. “That makes credit to new projects more difficult—one reason we are seeing a slowdown.”
Moody’s estimates that 8 percent to 12 percent of China’s total loan portfolio could be nonperforming: The official figure is 1.2 percent. Earlier this year, Fitch Ratings warned that nonperforming loans could reach as high as 30 percent. Especially vulnerable are small businesses. They account for 80 percent of employment, according to China’s Ministry of Industry and Information Technology, yet struggle to get credit.
- China is hiding, not solving its financial problems – Victor Shih (chinaherald.net)
- China can deal with its sky-high debts – Victor Shih (chinaherald.net)
- Disclosure government debts ‘step forward’ – Victor Shih (chinaspeakersbureau.info)
- China’s government still controls economy – Victor Shih (chinaspeakersbureau.info)
- What about the underground financial bubble? – Victor Shih (chinaherald.net)