2 October 2015
Global Economic Perspectives: A hard landing in China?
net foreign assets as large as China's and a current account surplus. China
doesn't need to import capital to sustain credit growth.
Neither are banks in China likely voluntarily to suspend financing even to high-
risk borrowers. Government ownership ensures, we think, that banks will
continue to lend to finance infrastructure investment even where purely profit-
maximizing lenders would not.
Eventually, this will have to change. Depositors will not forever keep their
savings in a banking system that keeps piling up more and more implicit bad
loans. But with general government debt of only about 55% of GDP. China is a
long way away from a sovereign debt crisis, in our view. And therefore it is a
long way away from a banking crisis and a hard landing.
Michael Spencer, Hong Kong, (+852122038305
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