China on Borrowed Time?
A new report out paints a dark picture of China's banking system. Bad loans may total $900 billion, more than previously estimated. And there's some evidence that overeager investors in Chinese banks are now pulling back. I spoke with Nicholas Lardy, a China economy expert, about the report. His take is that it highlights the almost complete ...
A new report out paints a dark picture of China's banking system. Bad loans may total $900 billion, more than previously estimated. And there's some evidence that overeager investors in Chinese banks are now pulling back. I spoke with Nicholas Lardy, a China economy expert, about the report. His take is that it highlights the almost complete failure of government asset management companies set up to dispose of bad bank debt. These companies, says Lardy, have moved at a glacial pace, don't publish financial reports, and may be costing China more than they're recovering. "It would have been better for the government to just flush [its debt] away," he told me. News like this can only fuel the reappraisal of the China hype that leading scholar Minxin Pei launched in FP.
A new report out paints a dark picture of China's banking system. Bad loans may total $900 billion, more than previously estimated. And there's some evidence that overeager investors in Chinese banks are now pulling back. I spoke with Nicholas Lardy, a China economy expert, about the report. His take is that it highlights the almost complete failure of government asset management companies set up to dispose of bad bank debt. These companies, says Lardy, have moved at a glacial pace, don't publish financial reports, and may be costing China more than they're recovering. "It would have been better for the government to just flush [its debt] away," he told me. News like this can only fuel the reappraisal of the China hype that leading scholar Minxin Pei launched in FP.
David Bosco is a professor at Indiana University’s Hamilton Lugar School of Global and International Studies. He is the author of The Poseidon Project: The Struggle to Govern the World’s Oceans. Twitter: @multilateralist
More from Foreign Policy

Saudi-Iranian Détente Is a Wake-Up Call for America
The peace plan is a big deal—and it’s no accident that China brokered it.

The U.S.-Israel Relationship No Longer Makes Sense
If Israel and its supporters want the country to continue receiving U.S. largesse, they will need to come up with a new narrative.

Putin Is Trapped in the Sunk-Cost Fallacy of War
Moscow is grasping for meaning in a meaningless invasion.

How China’s Saudi-Iran Deal Can Serve U.S. Interests
And why there’s less to Beijing’s diplomatic breakthrough than meets the eye.