＜prologue＞
I started a blog called “The Baby Boomer Generation’s Miscellaneous Blog”（Dankai-sedai no garakutatyou:団塊世代の我楽多（がらくた）帳） in July 2018, about a year before I fully retired. More than six years have passed since then, and the number of articles has increased considerably.
So, in order to make them accessible to people who don’t understand Japanese, I decided to translate my past articles into English and publish them.
It may sound a bit exaggerated, but I would like to make this my life’s work.
It should be noted that haiku and waka （Japanese short fixed form poems） are quite difficult to translate into English, so some parts are written in Japanese.
If you are interested in haiku or waka and would like to know more, please read introductory or specialized books on haiku or waka written in English.
I also write many articles about the Japanese language. I would be happy if these inspire more people to want to learn Japanese.
my blog’s URL:団塊世代の我楽多（がらくた）帳 | 団塊世代が雑学や面白い話を発信しています
my X’s URL:団塊世代の我楽多帳（@historia49）さん / X
A detailed report by Tatsuichi Seki, deputy chief researcher at the Japan Research Institute, has been published in “PRESIDENT Online.” I would like to introduce the main points.
China is catching up to the United States as the world’s second largest economic power, but we are currently in the midst of a US-China trade war and the future is uncertain.
Seki points out that “China’s official statistics lack credibility. It is estimated that there are about 10 times the potential non-performing loans than the official statistics suggest, and there is about a 40% chance of a financial crisis occurring within five years.”
1. China’s estimated bad loans are 10 times higher than official statistics
“Bad loans” generally refer to loans or similar loans that financial institutions are no longer able to receive repayments or interest payments as agreed upon.
In China, financial institutions have made “excessive loans” through “lax loan screening that underestimates the risks.” As a result, financial institutions are left with huge amounts of bad loans.
According to official statistics from the China Banking Regulatory Commission, the non-performing loan ratio of commercial banks at the end of 2015 was 1.7%, and the balance of non-performing loans was 1.2744 trillion yuan (approximately 20.39 trillion yen, assuming 1 yuan = 16 yen).
2. Three problems with official statistics
(1) There are cases where financial institutions use methods such as “rollover” and “lowering the standards for determining bad loans” to treat loans that should be recorded as bad loans as normal loans.
(2) “Off-balance sheet credit” (credit not included on financial institutions’ balance sheets), or so-called “shadow banking,” is not included in the official statistics.
A typical example of “shadow banking” is “bank wealth management products.” These are “high-risk financial products” that banks sell to individuals and companies. The problem is that banks provide “implicit guarantees” (loss compensation) for these “bank wealth management products.”
(3) It is questionable whether the authorities are enforcing standards for determining non-performing loans and fulfilling their supervisory responsibilities adequately.
3. Potential bad loan (hidden bad loan) ratio and estimated amount of potential bad loan
According to Seki’s estimate, the potential bad loan ratio is 8.6%, and the estimated amount of potential bad loan is 12.5 trillion yuan (approximately 200 trillion yen, assuming 1 yuan = 16 yen). This is equivalent to 18.5% of nominal GDP.
4. There is a 40% chance of a bubble bursting.
It is said that a financial crisis is likely to occur if the pace of credit expansion is too fast compared to the size of the economy. According to an IMF study, of the 42 countries (nationwide) whose total credit to GDP ratio has increased by 30 points or more over the past five years, 43% (18 countries) have experienced a “hard landing” accompanied by a financial crisis.
If a financial crisis were to occur in China, its economic growth rate would fall from the current 6-7% to the 3% range, and labor demand would fall sharply.
If mass unemployment on the scale of millions were to occur, it could even lead to the collapse of the one-party dictatorship of the Communist Party that has continued for 70 years since 1949.
Another newspaper reported that China’s non-performing loans increased by 10% in the six months from January to June 2019, reaching 90 trillion yen when combined with “suspect loans.”
There is a possibility that President Xi Jinping’s “One Belt, One Road Initiative” and “loan shark-like lending offensive into Africa” could collapse as a result of a financial crisis.
