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China debt crunch

Specter of property-driven cash crunch looms over Chinese banks

Cooling land market risks leaving authorities with less income to fund rescues

A man walks past a branch of Shengjing Bank in Liaoning Province: Chinese banks' exposure to struggling developers like Evergrande has become a growing threat.   © Reuters

SHANGHAI -- Chinese banks' massive lending to the real estate sector looks increasingly likely to backfire on many as default fears mount -- and may ultimately make it harder for authorities to bail them out.

Aggregate lending by Chinese banks to developers came to 14.2 trillion yuan ($2.2 trillion) at the end of June, according to Moody's Investors Service. This accounts for 7.4% of total bank loans, Moody's says, and is equivalent to more than half of the 25.5 trillion yuan in net capital held by commercial banks in government data.

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