Do you view China as an economic ally for the U.S. or a growing threat?
Leave your comments at the bottom of this story. Just as American banks once were, Chinese banks are being loose with credit. According to figures from the People’s Bank of China, China’s central bank, banks made 7.37 trillion yuan ($1.1 trillion) in new loans during the first half this year. By way of comparison, Chinese banks issued 4.91 trillion yuan in new loans during all of 2008. China’s lending target for all of this year had been just 5 trillion yuan. As such, there are reports that China’s top banks may soon impose limits on new loans, which could lead to slower growth in China’s economy. The hefty loan volume is raising the specter of a potential bad loan bust in China, similar to the subprime nightmare that U.S. banks had to endure. “Lending from Chinese banks was high-powered stimulus, but the risk is that loans are being made in an environment where more of them are likely to go bad,” said Andrew Busch, global currency strategist with BMO Capital Markets in Chicago.
