Chinese banks are facing serious default risks on more than Rmb1,550bn ($228bn) in loans they have lent to local governments across the country, according to senior Chinese officials.In a preliminary self-assessment carried out at the request of China's banking regulator, the country's commercial banks have identified about one-fifth of the Rmb7,700bn lent to local government financing vehicles, which are mostly used to fund regional infrastructure projects....Since the start of this year, top Chinese bankers and regulators have publicly warned that many of the loans used to boost growth through massive infrastructure spending and a property boom will eventually go bad. "The risks in government-backed financing vehicles, the property industry and sectors with overcapacity problems are particularly worth noting," CBRC chairman Liu Mingkang said last week in a prepared statement on risks in the banking system....But analysts say the apparent success of the clampdown on lending actually disguises a worrying new trend that involves banks co-operating with lightly regulated trust companies to keep loans off their books.
In a preliminary self-assessment carried out at the request of China's banking regulator, the country's commercial banks have identified about one-fifth of the Rmb7,700bn lent to local government financing vehicles, which are mostly used to fund regional infrastructure projects....Since the start of this year, top Chinese bankers and regulators have publicly warned that many of the loans used to boost growth through massive infrastructure spending and a property boom will eventually go bad.
"The risks in government-backed financing vehicles, the property industry and sectors with overcapacity problems are particularly worth noting," CBRC chairman Liu Mingkang said last week in a prepared statement on risks in the banking system....But analysts say the apparent success of the clampdown on lending actually disguises a worrying new trend that involves banks co-operating with lightly regulated trust companies to keep loans off their books.
A new NBER working paper by Jing Wu, Joseph Gyourko, and Yongheng Deng (also discussed by Joseph Cotterill and Tyler Cowen), used recorded prices for 300 residential land auctions in Beijing to develop the first constant-quality land-price series for a Chinese market. The study concludes that inflation-adjusted constant-quality land prices have increased by nearly 800% since 2003:Q1, with half that increase occurring over the past two years. Source: Wu, Gyourko, and Deng (2010).
Source: Wu, Gyourko, and Deng (2010).
