Chinese Credit Bubble

Full Name
Chinese Credit Bubble
Event Type

Rapid increase in chinese bank and credit assets.



Mentioned by the Following

Event Types


  • Chinese banks had assets of ~40Trillion at the end of 2017
  • This is close to 50% of world GDP
  • No other country has come to this high level
  • Suggests that lending in China as not been very conservative
    • Much of the debt has funded "ghost cities", "bridges to nowhere" and other non-performing infrastructure projects
    • Created short term growth and jobs, but can't be repaid
  • A significant portion of Chinese Debt is denominated in US dollars (becomes harder to pay as the Chinese Yuan Falls against the Dollar)
  • Many state-owned-enterprises owe each other in an unsustainable chain that will be hard to repay
  • Wealth Management Products (WMP) are invested in troubled real estate deals
  • Significant amount (trillions) of off-book debt from local governments
  • Considered by some to be a Ponzi Scheme
    • The debt can't be repaid, rolled over or refinanced without the help of the government
    • The debt hasn't generated enough income/value to pay for itself
  • There are concerns that once this bubble breaks, it will also impact other markets
  • Large corporations and state governments began to default in 2018

Attempts To Control

  • President Xi Jinping tried a deleveraging program in 2017, but it was too hard to swallow. 
  • The economy began to cool too quickly
  • Instead more debt fueled projects and growth followed in 2018