Even though the world’s second largest economy has a growth forecast of 6.5 percent of the GDP this year, the credit growth rate is quickly outrunning the GPD growth leading to a debt overhang problem.
Last year, following the result of a health check, the International Monetary Fund IMF issued a warning that China’s economy is reliant on too much debt. The analysis of the China’s financial system found that credit was high by international levels. The recent rapid growth of the Chinese economy has known to be fueled by the huge debt levels at both local and government levels.
Adding to this the Bloomberg economists Fielding Chen and Tom Orlik estimate China’s total debt will reach 327 percent of gross domestic product by 2022, double the level in 2008. That will put China amongst the most indebted countries in the world...