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Bad loans at Chinese banks have hit their highest level since June 2006, rising 51% over the past year to 1.27 trillion yuan, more than quadrupling Chinese debt since 2007 (from $7T to $28T).
In a February letter, hedge fund manager (and 2008 recession prophet) J. Kyle Bass told investors China’s mounting credit crisis could cause losses four times the size of the Great Recession.
The debt crisis could mean an implosion for the Chinese economy, something that could send even more yuan to US real estate. In 2015 alone, total Chinese funds in the US hit $1T, Business Insider reports.
The capital outflow doesn’t help China’s economic woes, and the government has been doing its best to stop the capital flight. But even if the government succeeds, wealthy Chinese will find other ways to flee to safer shores.
Bob Knakal, Cushman & Wakefield's chairman of New York investment sales, told Bisnow last week that laws like the recent FIRPTA bill have paved the way for more foreign investment.
Besides, lots of Chinese buyers keep their cash outside of the country to use as they wish. "Capital markets are very efficient," Bob told us. "I think there would be alternative sources of capital that come in to fill the niche.” [BI]
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