Crescat Capital recently published a chart showing the growth of the banking systems of China, the US, Japan and the Eurozone since the global financial crisis of 2008. The growth in Chinese bank assets is off the charts and has reached $39 trillion or nearly 300% of Chinese GDP. Unprecedented isn’t the word. There has been a lot of ink spilled about the actions of the Federal Reserve and ECB bailing out their banking systems but their efforts pale into insignificance when compared to China. Out of control credit growth always ends badly. The Chinese stock market is -25% year-to-date and has almost halved since peaking in 2015. It is difficult to see how emerging market equities can rally for a sustained period until excesses in the Chinese banking system are unwound.
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