Reported non-performing loans are 6pc of GDP but not much is reported. The figure for loans “potentially at risk” has soared to 15.5pc or $1.3 trillion. The IMF warned that losses could amount to $756bn.
The Fund warned of an “abrupt repricing of credit risk”, followed by a “credit crunch”, ending in a “disorderly deleveraging scenario with severe negative implications for financial stability.”
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Debt in China is still growing faster than the economy. The government has had its foot on the pedal since last July, rattled by the unexpected recession of early 2015 (which it never admitted). This reached a crescendo with a 23pc rise in lending to a record $650bn in January and February. The Communist Party has been reaching for the bottle again.
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Fitch Ratings says the efficiency of credit – the extra yuan of GDP growth generated by each extra yuan of debt – has collapsed by two-thirds to a ratio of 0.2 since the lending spree began in 2009. The risks are rising exponentially for little gain. Beijing is buying time in a Faustian Pact that grows more dangerous every month.