China's Banking Crisis Begins

Confirming the thesis expressed in American Thinker on October 21st regarding the growing uncompetitiveness of China manufacturing, two days later reported "China's biggest banks tripled the amount of bad loans written off in the first half, cleaning up their books ahead of what may be a fresh wave of defaults." Despite the common belief among economists and most Americans that the booming Chinese economy of the last ten years was a "miracle", it is now apparent that the secret sauce for China's success was allowing a massive expansion of bad loans to subsidize Chinese employment in manufacturing. The China banking sector has always been dominated by four large state-owned banks (SOBs) that account for more than 75% of both business loans and household deposits. Leading up to the Soviet Union's collapse and the implosion of communist nation's trade agreements in the early 1990s, China's SOBs increased their lending from 50% to 120% of the nation's Gross Domestic Product...(Read Full Article)