Indeed, we have long argued that the rate of credit expansion has been huge both in the formal banking sector as well as the hidden debts within the shadow banking sector. For instance, we have noted that banking assets in China is roughly 2 times of China’s GDP, while the growth of banks’ off-balance sheet assets, trust industry, credit guarantees and many other parts of the shadow banking system poses additional risks.
Read more about debts in China
Credit Suisse’s Andrew Garthwaite helps us to put this in perspective. The chart below from his latest strategy note shows that the credit expansion in China over the past 5 years have topped other recent examples of credit booms which, as we all know, did not end well.