Growth rate of China’s debt ‘not sustainable for long’
S&P Global Ratings said China’s banks may need to raise as much 11.3 trillion yuan ($1.7 trillion) of fresh capital from 2020 because of troubled credit, should a corporate debt binge fail to slow.
The potential cost, highlighted in a statement on Tuesday, equals 16 percent of last year’s nominal gross domestic product, S&P said.
The warning adds to a drumbeat of concern over a surge in Chinese corporate credit since the global financial crisis and dwindling economic returns as the nation gets less bang for its buck and companies spend more on servicing debt. The government on Monday issued guidelines for debt-for-equity swaps intended to help tame excessive leverage.