Beijing leadership….serious sub-prime problem

The Bloomberg site this afternoon (GMT) confirmed The Slog’s fears – expressed here in recent posts – that Chinabanks are looking to the markets for funding because of bad debt caused by the Beijing regime’s sudden clampdown on the property bubble.

Quoting an off-the-record Beijing source, Bloomberg notes that ‘Chinese banks may struggle to recoup about 23 percent of the 7.7 trillion yuan ($1.1 trillion) they’ve lent to finance local government infrastructure projects’.

The China Banking Regulatory Commission has apparently told banks to write off non-performing project loans by the end of this year. Liu Mingkang, the CBRC’s chief, said borrowing by the Chinese ‘government financing vehicles’ were “a threat to the banking industry”. The Chinese Agribank is just one of the nation’s five-largest banks planning to raise as much as $53.5 billion to replenish capital, after the sector extended a record $1.4 trillion in credit last year.

New York credit sources told The Slog early evening today that the Chinese situation is a near-perfect parallel to the everyone-gets-a-loan madness that pertained in the US during 2006.