China watchers have long waited for this moment to happen: the moment when the debt bubble finally blows up.
We haven’t seen the explosion yet, but we are getting closer, according to a recent report by Hua Chuang Securities cited by Bloomberg.
The shocking finding: Chinese companies are using as much as 45 percent of new debt issuance just to pay the interest on existing debt. To the tune of $1.2 trillion this year.
“One of the reasons credit is growing is because they are using loans to pay interest payments. The primary need and use for expanded private credit is to fund the interest payments,” says Richard Vague, author of “The Next Economic Disaster.”
Source: Bloomberg
