J.D

The Next Credit Crisis Will Originate in China

I'd be interested in knowing which of China's 600 000+ SOEs the senior executive is NOT appointed by the party. I'm surprised it's not 100%. It doesn't really matter though given the other controls available.

As President Hu reminds us, State Owned Enterprises will remain the dominant force in China's socialist market economy (and the largest of them grew by 21% by assets in 07). That includes State-owned banks so systemic issues will certainly one day return in force. The urge for market-based reform has waned.

But a credit crisis? NPL issues in China have been managed by loan expansion and government bailouts and in the case of a slowing economy, the cycle would just repeat. It's not credit if you're not really expected to pay it back, so there can't be a real credit crisis in China.