China's debt bomb looks ready to explode

Many warning signs suggesting that a debt reckoning is imminent

Minxin Pei

July 17, 2022 05:00 JST

20220714 demonstrator Zhengzhou Henan.JPG

Demonstrators hold banners during a protest over the freezing of deposits by rural-based banks outside a People's Bank of China building in Zhengzhou, Henan Province, on July 10: The shuttered rural banks are minions in China's financial system. © Reuters

Minxin Pei is professor of government at Claremont McKenna College and a nonresident senior fellow of the German Marshall Fund of the United States.

Confidence in the safety of Chinese banks has been badly shaken by the failure of several small banks in Henan Province in April this year. In terms of their assets of about 40 billion yuan ($6 billion) and the number of customers, roughly 400,000, the shuttered rural banks are minions in China's financial system.