China still vulnerable despite war on bad debt – Richard McGregor

From the Financial Times (link)

At first glance, Beijing would appear to have tackled head-on the mountain of bad debt in its state banking system, debt which has built up over some 20 years since the government began opening the economy in the late 1970s.

In 1999 the government established bad-debt disposal companies to sell off sour loans, used bank profits to wipe out more and also pumped in cash from its foreign exchanges reserves to recapitalise the institutions.

In all, China cleared about $560bn (‚Ǩ444bn, ¬£305bn) of bad debts in a flurry, an amount equal to about half the country’s gross domestic product at the time the funds were deployed.

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