More on China's Financial Sector
The New York Times had an article this Wednesday (Nov. 15, 2006) where a former risk adviser to a major Chinese bank revealed that the number of bad loans (NPLs or non-performing loans) was much much worse than what is revealed in the bank's publicly available ledgers: Rare Look at China's Burdened Banks. In the case of China Construction Bank (the bank that fired the risk adviser), "up to $3 billion in bad loans might have been intentionally hidden from outside auditors, just months before the bank's first sale of stock to public investors."
The November 2006 issue of The National Bureau of Economic Research (NBER) Digest has an article describing research asking the question Will Super-High Chinese Growth Continue?. According to the article, China's Foreign Invested Enterprises (FIEs) have a disproportionate impact on the prospects for China continuing its torid pace of economic growth. The research concludes that if FDI (Foreign Direct Investment) levels drop off -- FDI being of critical importance to FIEs -- China's current economic growth rates will probably not be sustainable.