Economic Worries in China as Companies Pile Up Debt

The Chinese economy's 8% annual growth rate has made it one of the most impressive development stories of the past decade, but its dynamism may be getting out of control. Economic analysts from J.P. Morgan to Goldman Sachs, from US government officials to even China's Central Bank leadership are concerned about overcapacity and bad bank loans. Chinese banks are notoriously unconcerned with objective risk assessment, preferring instead to lend to companies whose heads have strong personal ties to bankers and loan officers. One estimate puts the bank loan default rate at around 50%. Such practices can't be sustained for long, analysts say. But the possibility of a slowdown in the Chinese economy isn't worrying only Beijing. If China does 'overheat' and growth falls off quickly, worldwide prices for commodities like oil and iron ore could drop because China would need less of these inputs. – YaleGlobal