Tag Archives: wen jiabao

China Facing ‘Massive’ Bank Bailouts

14 Mar

From Bloomberg:

China may be forced to bail out banks that made loans for local-government projects under the unprecedented stimulus program unleashed in 2008, according to Citigroup Inc. and Northwestern University’s Victor Shih.

In a “worst-case scenario,” the non-performing loans of local-government investment vehicles could climb to 2.4 trillion yuan ($350 billion) by 2011, Shen Minggao, Citigroup’s Hong Kong-based chief economist for greater China, said yesterday.

“The most likely case is that the Chinese government will engineer a massive financial bailout of the financial sector,” said Shih, a professor who spent months researching borrowing by about 8,000 local government entities.

More on the growing concerns about China’s property bubble and risks to its economy here, and here.

Premier Wen: ‘Latent Risk’ In China’s Banks

5 Mar

From Bloomberg:

Premier Wen Jiabao warned of “latent risk” in China’s banks and pledged to crack down on property speculation as the government faces the consequences of flooding the economy with money to drive growth.

“The domestic economy still faces some prominent problems,” Wen, 67, said in a speech in Beijing to the National People’s Congress, similar to the U.S. State of the Union address. He also cited excess capacity in manufacturing and weak support for rural-income growth.

Wen’s comments reinforce concern that loans made in last year’s record 9.59 trillion yuan ($1.4 trillion) credit boom may go bad. Harvard University Professor Kenneth Rogoff has said growth could slide to 2 percent from Wen’s 8 percent target within a decade as a debt-fueled bubble collapses..

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