Chinese banks are facing a staggering loss of RMB 8 trillion – or $1.7 trillion, says French investment bank Societe Generale. This may in other words be described as 60% of capital in China’s banks is at risk. The debt is not shrinking by accelerating, according to Societe Generale. China’s overall non-financial debt grew by 15.2% in 2015 to RMB 167 trillion ($35 trillion) or almost 250% of gross domestic product (GDP). That is up from 230% of GDP the year before and the 130% it was eight years ago before the global financial crisis hit. The problem is largely centered on China’s 150,000 or so unprofitable state-owned enterprise (SOE) sector (SOEs), which suck-up an entirely disproportionate amount of the nation’s capital. Although contributing to less than one-third of economic output and employment, SOEs take up nearly half of bank lending (RMB 37 trillion) and more than 80 per cent of corporate bond financing (RMB 9.5 trillion), Societe Generale found.
