China's banks may have a flood of bad loans waiting in the wings

The situation won't inspire confidence among foreign banks that are kicking the tires of smaller local lenders they may use to enter the Chinese market

China’s banks may have a flood of bad loans waiting in the wings. Not that you’d know it from looking at official levels for 2018, which suggest the problem was broadly contained. The reality is that newly soured debt was coming through the front door as fast as banks could shovel it out the back.

Authorities worked hard to restrain financial-system leverage in 2018. Outstanding credit increased a relatively modest 10 per cent, with growth in new loans falling 14 per cent. The government accomplished this primarily by tightening restrictions on shadow banking and moving that lending into the formal banking