Chinese Banks Will Need $1.7 Trillion To Cover Bad Debt Deluge, S&P Calculates | Zero Hedge: "For now Beijing's response has been mostly optical. On Monday, the Politburo announced a series of guidelines aimed at cutting company debt levels which some fear could destabilise the world's second largest economy. Encouraging mergers and acquisitions, bankruptcies, debt-to-equity swaps and debt securitisation are some of the measures intended to improve credit allocation and stop wasteful spending in the economy. The problem is that all those "other" market participants, mostly SOE banks, for whom the soon to be impaired debt is an asset, will need lots of cash, as much as $2 trillion according to S&P, to offset the hole on the balance sheet.
How China's banks will raise this amount is unclear.
"We expect further deterioration in the credit strength of state owned enterprises as they continue with their debt-funded expansion," S&P Global's report said. "High leverage in corporates will likely constrain investments and aggregate demand.""
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