Bad debts just get bigger
The best guess as to the eventual size of Chinese banks’ bad debts is that they will be many times larger than initial official estimates. In a desperate effort to clean up their balance sheets, banks have shifted bad debts to asset management companies. But there’s no sign that these can offload them to new money investors or engineer decent recovery rates. And there’s plenty more to come. Ministers may feel a little queasy when they get the final bill.
There have been a few rumblings coming from the Chinese mainland and its banks as they attempt to tick off the tasks on their things-to-do list. On the positive side, Bank of China has been awarding valuable mandates to privatize its Hong Kong operation.