The central government is actively going after its major state-owned banks for ‘violations’ in its lending policies, indicating concern about the direction of China’s financial system. China is not yet facing a Lehman moment, tells business analyst Shaun Rein the BBC, but action is needed.
The Xinhua news agency report said that the [National Audit Office] NAO had retrieved 22bn yuan worth of illegal or embezzled loans and authorities had prosecuted 693 people in relation with those loans.
“This is a significant development. It shows that the authorities realise that bad loans is a massive issue and that they need to rein it in,” Shaun Rein of China Market Research Group told the BBC…
Analysts say that bad loans could threaten China’s growth going forward.
“We are not facing a Lehman moment in China tight now,” said Mr Rein, referring to the collapse of Lehman Brothers in the US at the height of the financial crisis in 2008.
“But if they don’t stop the problem, and it is allowed to balloon, we could face a serious crisis.”
However, Mr Rein added that Chinese authorities had indicated in recent days that they were aware of the issue and was determined to tackle it.
This week China’s central bank temporarily turned off the flow of cheap money in an attempt to reduce the reliance of banks on credit.
Shaun Rein is a speaker at the China Speakers Bureau. Do you need him at your meeting or conference? Do get in touch or fill in our speakers’ request form.
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