China on Borrowed Time?

Posted By David Bosco Wednesday, May 3, 2006 - 2:22 PM Share

A new report out paints a dark picture of China's banking system. Bad loans may total $900 billion, more than previously estimated. And there's some evidence that overeager investors in Chinese banks are now pulling back. I spoke with Nicholas Lardy, a China economy expert, about the report. His take is that it highlights the almost complete failure of government asset management companies set up to dispose of bad bank debt. These companies, says Lardy, have moved at a glacial pace, don't publish financial reports, and may be costing China more than they're recovering. "It would have been better for the government to just flush [its debt] away," he told me. News like this can only fuel the reappraisal of the China hype that leading scholar Minxin Pei launched in FP.

EXPLORE:SOUTH ASIA, CHINA, ECONOMICS

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