Bubbles in credit and real estate have led to a steady flow of bad debt in China for years. But now a bubble is forming in the market for the bad loans themselves, says the chairman of China’s largest state-controlled “bad bank”.
Banks in China are dealing with an onslaught of non-performing loans that have resulted from poor risk controls and years of loose monetary policy. Investors estimate that China’s stock of bad debt has risen to $3tn this year, in step with a decelerating economy. One prominent analyst said recently that the figure could be as high as $6.8tn.
As the pool of bad assets rises, so too has the number of Chinese investors willing to chase after bad debt portfolios.
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