Obviously there is corruption. But the bigger problem is the inefficiency of a centralised state, hinted at in "the implicit guidance on the pace and direction of new lending". The real problem are the bureaucrats whose careers depend on building x,000 new housing units and creating y,000 new jobs. It doesn't matter whether these are real jobs or whether anyone wants to live in the new houses, all that matters is that the mayor or whoever can report that it has happened to his superiors. Beyond that, they have no real interest in the sustainability of the building they order, or the lending that is needed for it to happen. It's the Communist equivalent of NINJA mortgages, and is why you get all these "ghost cities" being built like Zhengzhou New District and New Ordos, and why there's 65 million empty houses in China.

That's not corruption as such, it's just the way the political system works in China. In order to save the world economy, perhaps the Staggers could persuade China to be a bit more capitalist and a bit less socialist about this kind of thing?

they definitely need a market system like ours which no corruption, real transparency, leadership, etc. after all look how well we are doing!

I roughly agree with the writer's analysis of the Chinese financial system. However, he failed to mention the fact that the Chinese central bank, Peole's Bank of China, requires all the banks to lodge over 20% of their reserves with them. Also the 'big four' Chinese banks, as they are known, do not have a liquidity problem. Besides the dangers pointed out by the IMF many local authorities borrowed money to build what are in effect, just prestige projects which have little or no economic value in terms of returns. However, despite the problem of largely uncoverable debts and the problems identintified by the IMF, the still rapid growth of the Chinese economy will mean many of these problems will become increasingly less important over time. China's greatest danger is if it's economy slows to less that 5 to 6%. If that happens the issues identified by the IMF will become more important.

65 million empty homes in China? That should knock a hole in Chinese property prices.

Perhaps we should built a few more here?

@ matthew hall
having around 2 trillion dollars (reserve curreny of the world) is not what most would define a liability, but agreed, the coming years of printing will mean it gets devalued- it's why the chinese (I belive) are making a mistake- they should SPEND it, order in 1000 passenger jets, 10 metro systems, 5 power grids etc... that way they would avoid the inflationary impact AND aid growth in the west. It seems they are led by numpties as well os they think they can do it themselves. well i won't ride on a chinese jet thanks...

The I-M-F????

The obscenely over-paid hacks and servitors and bumsuckers of the obscene rich who totally failed to see the 2008 Crash coming are giving ADVICE?

Excuse me while I vomit.

The Chinese Government controls the Chinese banks. The Chinese Government is rich as Cresus, sitting on a massive balance of payments surplus.

The banks could give money away by the barrowload and it wouldn't make a dent.

Given that the IMF has such a splendid record in predicting the 2008 crisis in the USA, the Icelandic- and Irish crashes, and the current crisis roiling the Euro zone, the Chinese would be advised to listen very closely to the words - or should I say, «pearls» ? - of wisdom issuing from the fund's headquarters in Washington....

If the capitalist system went bust a few years back despite the bailout,there is no guarantee that the communist system is going to survive.

Aren't the Chinese sitting on a surplus balance to the tune of TRILLIONS of dollars?

Yeah, it sounds like they're doing it wrong and should follow our example.

Good to highlight problem simmering away.
In answer to why you're surprised it dosen't get more attention it's just that the western indebted countries crisis is way worse, opposition in China is crushed (literally at times), they do have a very large 'cash cushion'also, and an underfunded welfare state so in the event.
Certainly, if their little bubble implodes, really ain't gonna help things. They're now a global player, but the comunist party can't really handle this move into the big league, and this cashes out at international level as not spending enough with western economies since they are still stuck in a mindset that admitedly got them to where they are now. They want to copy our technology instead and build for themselves WHILST funding this by selling to us- they have not realised that equation doesn't hold for ever but they have been advised by the same bunch of clown economists who been spouting in the West for years. Our politicians have been extremely weak with them at the negociating table (which is how the trade imbalance got so large, krugman woudn't know about that), instead our politicians imported deflation vote buying sweeties, and the chinese laughed all the way to the bank. A banking problem will flare up there sure as night follows day, it is part of the cycle of things- very few people are stupid enough to think they can overcome natural laws of growth or motion, and when they try the consequences are disastrous...

If China was going under wouldn't they demand their loans back from the american's and EU? just a thought

TheIMF scum shoould be told: get lost, you do not have a red cent worth of CREDIT left.

You are grotesquley overdrawn.

You are BANKRUPT.