China’s Risky Credit Boom

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Credit in China is growing at a breakneck pace, raising serious concerns about the level of risk in the financial system. The government now must determine how to balance the economy’s liquidity needs with protecting the system's solvency.

HONG KONG – Credit in China is growing at a breakneck pace, having increased from 125% of GDP in 2008 to 215% in 2012. Local-government debt has soared by 70% since 2009, reaching almost $3 trillion last June. This is raising serious concerns about the level of risk in China’s financial system.

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