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Moody's warns over China bad debt
BBC News

http://www.bbc.co.uk/news/business-14024999


Analysts have warned that excessive lending could hurt China's economic growth


Bad debts held by local governments in China are a far bigger problem than first estimated, ratings agency Moody's has warned.

Chinese banks had lent 8.5tn yuan ($1.3tn; £820bn) to the local governments in 2010 in an attempt to boost growth.

However, the agency said the debt burden could be 3.5tn yuan larger than auditors had estimated.

It warned that bad debt could reach between 8% and 10% of the total loans.

"When cross-examining the findings by the 27 June National Audit Office (NAO) report, in conjunction with reports from Chinese banking regulators, we find that the Chinese audit agency could be understating banks' exposures to local governments by as much as 3.5tn [yuan]," said Yi Zhang of Moody's.

Ms Zhang explained that since these loans were not covered by the NAO, they were not considered as real claims on local governments by the audit agency.

"This indicates that these loans are most likely poorly documented and may pose the greatest risk of delinquency," she added.

Moody's warned that given the scale of the problem, the credit outlook for China's banking sector could turn to negative.

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Well, Moodys have been busy little bees today haven't they, they've just downgraded Portugal's  debt to junk bond status as well:

http://www.bbc.co.uk/news/business-14038529

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yeah i heard about the portugal thing. not sure what exactly this means with china. i guess it means that even though they are growing, they're not immune to the same kinds of bad fiscal decisions that our politicians make.

although i'm sure portugal didn't aid in greece's bailout, it reminds me of something i heard on the news the other day. something to the effect of, "greece is being bailed out by countries that could likely use bailouts themselves." and "how long can the IMF prop all these countries up?"

i'm telling you, the amount of debt that exists now is highly dangerous for the world economy. governments have been doing this kind of thing for way too long.