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Why a banking crisis in China seems unavoidable

China’s debt – in particular its corporate debt – is large by historical and international standards. This column argues that of greater concern is the sharp increase in recent years, and that the vulnerability is heightened by the concentration of this debt in old industries that suffer from overcapacity and weak competitiveness. The authorities appear to be only now taking steps to halt the rise in corporate debt, but as prior episodes of banking crises show, this is unlikely to be enough to avert either a prolonged period of slowing growth or a financial crisis in the medium term.
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