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Beneath the surface of the global financial system lurks a multitrillion-dollar problem that could sap the strength of large economies for years to come.

The problem is the giant, stagnant pool of loans that companies and people around the world are struggling to pay back. Bad debts have been a drag on economic activity ever since the financial crisis of 2008, but in recent months, the threat posed by an overhang of bad loans appears to be rising. China is the biggest source of worry. Some analysts estimate that China’s troubled credit could exceed $5 trillion, a staggering number that is equivalent to half the size of the country’s annual economic output.

Official figures show that Chinese banks pulled back on their lending in December. If such trends persist, China’s economy, the second-largest in the world behind the United States’, may then slow even more than it has, further harming the many countries that have for years relied on China for their growth.

Read the Full Article: Source – New York Post
Time For Truth: (New York Times) – Toxic Loans Around the World Weigh on Global Growth

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