China’s banking crisis has begun

Hong Kong economist said debt bomb is about to explode.

Prof Larry Lang noted that a banking crisis has already begun, and that it will lead to a full-blown economic crisis before too long. He said a banking crisis is one of the major dangers to China’s economy.

The cause of the bank crisis overall is due to many local governments such as those in Shanghai, Sichuan and Yunnan defaulting on their debts.

Lang said that among 16 listed banks, 10 have seen their stock prices fall below book value with another five coming quite close. He pointed out that no other country has seen such a record.

While regular banks are burdened by debt, the non-bank financial system or the shadow banking system is also in trouble, Lang said. The shadow banking system includes private loans, corporate credit and underground financing operations.

Lang predicted the shadow banking system will soon accumulate too much debt and become another horrific financial crisis for China.

He holds a Masters degree and a Ph.D. degree in Finance and is a Professor of Finance at The Chinese University of Hong Kong.