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17 Jun 2013
China's credit bubble unprecedented, Fitch says
FXstreet.com (Barcelona) - China's shadow banking system is losing sight with reality, leading the sector to reach levels out of control and under mounting stress as problems to pay back short-term debts grow, Fitch Ratings has warned.
Even though China has proven very resilient to overcome past credit crisis, in this case, Fitch says it is so extreme that the country will find it very hard to come out without its growth numbers being severely affected, a very gloomy scenario indeed.
"The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation," said Charlene Chu, the Fitch senior director in Beijing.
According to The Daily Telegraph, which cites Charlene Chu, "There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling."
Fitch went on to say that wealth products with a total net worth of $2 trillion in lending are in fact a "hidden second balance sheet" for banks, which makes it easy to cover it up, this making regulator's efforts to spot excesses very difficult.
Even though China has proven very resilient to overcome past credit crisis, in this case, Fitch says it is so extreme that the country will find it very hard to come out without its growth numbers being severely affected, a very gloomy scenario indeed.
"The credit-driven growth model is clearly falling apart. This could feed into a massive over-capacity problem, and potentially into a Japanese-style deflation," said Charlene Chu, the Fitch senior director in Beijing.
According to The Daily Telegraph, which cites Charlene Chu, "There is no transparency in the shadow banking system, and systemic risk is rising. We have no idea who the borrowers are, who the lenders are, and what the quality of assets is, and this undermines signalling."
Fitch went on to say that wealth products with a total net worth of $2 trillion in lending are in fact a "hidden second balance sheet" for banks, which makes it easy to cover it up, this making regulator's efforts to spot excesses very difficult.