BIS sees re-run of 1998 Asian crisis as Chinese dollar debt soars

According to The Telegraph the world’s banking watchdog warns that foreign loans to companies and banks in China has tripled over the last five years and may be large enough to set off financial tremors in the West.

Foreign loans to companies and banks in China have tripled over the last five years to almost $900bn and may now be large enough to set off financial tremors in the West, and above all Britain, the world’s banking watchdog has warned.

The BIS said loose money policies by Western central banks since the Lehman crisis had cut the cost of foreign funding in East Asia, tempting firms to borrow heavily in dollars.

The risk is that this process could go into reverse as the US Federal Reserve shuts the spigot, triggering off a dollar liquidity shortage across the region with even bigger knock-on effects than during the East Asian crisis in 1997-1998.British-based banks hold almost a quarter of all cross-border bank exposure to China, and the figure has risen since 2008.

Some of the British banks are likely to be branches of Mideast lenders or agents of foreign wealth funds, recycling money through London.The BIS said the Asian dollar funding crisis after the Lehman crash should be a warning shot, though the sums in the region are already much larger.



Categories: Business

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