Kahou

Can China Weather a Downturn?

There are so many holes in your assumptions. First of all, Chinese pulled billions out of savings and lost 70% in the stock market...well, if someone lost 70%, someone gained 70%. The stock market is only back to the level it was 2 years ago!

As for NPLs, at least in residential mortgages, anyone who knows anything about Chinese consumers is that many still pay with all cash! The average LTV for a mortgage at origination is only around 40%. The max is 70%. House prices would have to fall 30% for people to even to start to consider defaulting on their loans. And as you pointed out, house prices are still UP 5% from a year ago on average!

"Ppl keep assuring themselves that a banking crisis is impossible"...Well these people are right! I don't see how your point that the Chinese government did indeed bail out its banks 10 years ago is an argument against that. If a country like America with its trillions of national debt can bail out its banks, why can't China, with trillions of f/x reserves and billions of current account surplus bail out its banks?

Furthermore, no matter how much the government spends as % of GDP to bail out banks, I think most who actually knows what they're talking about would agree that China is a far stronger country financially than any Western country.

Just look to history, even during the last financial crisis in 1997 which originated in Asia and brought Asian countries to their knees, China was able to shrugg it off. In the 10 years since, China is still growing 10% on average and millions are being lifted out of poverty each year. Today, the crisis is in Western banks and Western countries. Yet, China is many times stronger than it was 10 years ago. So I think you should worry about the US begging on their knees for Chinese assistance before you start talking about China not being in position to weather a downturn. FYI, China has enough cash to buy a large chunk of America, if America was for sale.