How Healthy Is The Chinese Economy

[Green Bear]

HONG KONG (MarketWatch) -- China's financial system could face $220 billion in losses due to bad loans, according to a report released Tuesday by Fitch Ratings.

Fitch said the losses could swamp the reserves of major banks, and in some cases completely wipe out their capital.

"This figure is close to one-third larger than the stock of capital in the entire banking system, underscoring the extent of asset quality weakness that still remains," said Charlene Chu, the report's author.

The report also puts the country's total amount of troubled debt at roughly $700 billion -- more than quadruple the $164 billion figure frequently cited by authorities.

While the government's number refers to officially classified bad loans at commercial banks, Fitch's number covers a broader range of debt, including "special mention" loans that are not yet nonperforming but may become so.

On top of the official $164 billion, Fitch cites $40 billion in bad loans at rural cooperatives as well as $270 billion of "problem loans" in the banking system which are not officially classified as "nonperforming."

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The Chinese government has been sensitive to high estimates of the country's bad-loan problem. On May 15, New York-based accounting firm Ernst & Young retracted a report that put China's potential bad-loan liabilities at $911 million.

The retraction came days after China's central bank issued a statement calling the Ernst & Young figures "distorted" and "ridiculous."

Ernst & Young denied its retraction was due to official pressure.

Bad loans may cost China $220 bln: Fitch

http://netscape5.marketwatch.com/News/Stor...t=netscapeclick

• Banking system collapse is possible

• Civil and political upheaval is quite likely

• Rampant inflation inside economy (circa 10%)

• The population is aging quickly, population will be declining fast before it becomes the economic superpower.

[jmf]

China Raises Lenders' Reserve Ratio to 10 Percent / 5th. time in 8 month!

http://immobilienblasen.blogspot.com/2007/...e-ratio-to.html

looks like they are way behind the curve......

[Mg_NG]

Well, no offense to China, but their political and social status doesn't really support the kind of economy that will lead to a healthy and promising market. One does affect the other, you know.

[jmf]

china down 9% biggest tumle in a decade

http://immobilienblasen.blogspot.com/2007/...n-10-years.html

funny how they blame now in part the raise of the reserve requirements a few weeks ago.....