The FT reported recently that Charlene Chu, a highly regarded ex Fitch analyst, estimates that bad debts in China could reach $7.6 trillion. This analysis is based on the surge of lending made during 08/09 and from extrapolating experience of similar credit booms in other economies. Once the boom turns to bust, bad debt ratios have peaked at an average of 34%, well above the 5.3% of loans currently being officially recorded as non-performing or in trouble within China. It would take a hard landing to sour loans to this extent, nevertheless anything like $7.6trillion represents a gigantic number. To put this number into perspective, US and European banks lost in the region of $3trillion during the financial crisis. Concerns about the health of the Chinese banking system have been circulating for many years. How can so much money have been deployed so quickly, so effectively? How big are the problems hidden in the shadows, what is discounted in current market valuations and what steps have the Chinese auth ...