PAPER TIGER:

Beijing's bad debts and budget deficits 'could hurt growth' (David Hsieh, 3/09/03, Straits Times)

A prominent economist has sounded a warning about China's troubled state banks, bulging budget deficits and hidden debts, which he said could hobble its economic growth.

Professor Wu Jinglian, who is a member of the country's top advisory body, said on Friday that the amount of non-performing assets (NPAs) held by the four state-owned commercial banks was far too high.

He said China's asset management companies, created to restructure bad bank loans, can only fix about 30 per cent of the 1.4 trillion yuan (S$294 billion) of NPAs transferred to them.

The rest is left to the government to deal with.

The state banks themselves still have 1.8 trillion yuan of NPAs on their books that must be written off by the government.

Prof Wu estimated that China's NPAs represent some 30 per cent of current gross domestic product.

Just as unsettling for the economist was the country's ballooning budget deficit, which hovered at around 3 per cent of GDP.

Hysteria about the prospect of China eventually becoming a peer of the U.S. makes even less sense than the old Japanophobia. Posted by Orrin Judd at March 8, 2003 11:24 PM