Banking

By Arthur Kroeber

Is China’s credit binge a financial time-bomb waiting to blow the country’s much-vaunted economic miracle to smithereens?

Beijing has long bet that the problem of bad loans can be solved by pushing off the day of reckoning into the future, with rapid economic growth reducing the size of the problem.

So far that calculated bet has proved a sound one.

But the unprecedented expansion in bank credit this year, coupled with last month’s decision to roll over for another decade the bonds used to finance the first non-performing loan (NPL) workout of 1999, make it a good time to submit this policy to a stress-test.

By Arthur Kroeber

Since 2006, financial reforms in China have been stuck in a rut. But for a number of reasons – most simply because Beijing now has little choice – we are now convinced that financial reform is going to be a far bigger part of the China story over the next three years.

The basic reason for this belief is not the intentions of regulators but brute economic reality.

By Arthur Kroeber

We had the somewhat qualified pleasure last week of attending the spring meeting of the International Institute of Finance — the assemblage of the great and the good of the world banking industry— which this year was held in Beijing.

Although as usual for such events there was a certain amount of high-level pabulum, two clear messages emerged from the cogent presentations by Chinese speakers.

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