South China Morning Post, a Hong Kong newspaper, is out today with a report on comments made by a former advisor to the Chinese State Council, Xia Bin, who worked as a senior official at the People’s Bank of China.

Key quotes

Systemic risks are elusive and spread fast” in China.

China’s official non-performing loan ratio, for instance, bore little resemblance to the true figure … “From a dynamic perspective, it should be beyond [the official figure of] 2 per cent”.

Similarly, banks’ exposure to the property market was far higher than official figures suggested.

Official numbers say that about a quarter of all outstanding bank loans are linked to real estate, but Xia said the real figure could be as high as 80 per cent if all loans that used property as collateral were taken into account.

The whole Chinese economy has been “hijacked” by property, and that has created an enormous threat to the country’s financial stability.

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