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Michael Pettis on the Chinese economy

FT Alphachat

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The Current State of the Chinese Banking System

Banks are forced to fund projects at lower interest rates than the market would otherwise dictate. This leads to a lot of non-performing loans in Chinese banks, he says. The key question is not what percentage of the loans are technically non-performing, but how much losses will be paid for by the household sector? "I think everyone would agree that it would probably be a very, very high number"

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