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China’s $24 Trillion Debt Bubble

ftmdaily.com / Jerry Robinson / January 10, 2014

Leading Chinese Securities Firm Warns of Growing Default Risk as China’s Debt Soars

  • China’s Second Largest Securities Firm Issues Latest Warning. Haitong Securities, China’s second largest brokerage, is warning investors that China’s soaring debt levels threaten to trigger a new financial crisis. According to the latest estimates, liabilities held by China’s non-financial firms may exceed 150% of GDP in 2014. “We are concerned that the debt snowball may get bigger and bigger and turn into a crisis,” said Li Ning, a bond analyst at Haitong Securities. “Default probabilities from next year may rise because more and more Chinese companies depend on new borrowings to repay old debt.”

China’s $24 Trillion Debt Bubble. By now, many investors know that since 2008, credit in China has exploded by $15.4 trillion, from $9 trillion to an astounding figure of $24 trillion — as much as the U.S. and Japanese banking systems combined. (In comparison, total U.S. bank assets grew by just $2.2 trillion during this same time period!) China’s monetary authorities are now attempting to rein in the world’s biggest credit bubble, which remains extremely vulnerable to higher borrowing costs.

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