China’s outstanding credit now at 200% of gross domestic product. Period of easy loans now over. Many debtors - including banks - risk insolvency. Fears for the region's economies, which export to the powerful neighbor.

Hong Kong (AsiaNews) - The Shanghai stock market has dropped even more today, to minus 3.8, after yesterday's crash of 5.3, the lowest since December 2012. Yesterday all Asian stock markets were in deep negative figures, although today there is a slight positive increase in Singapore, Seoul and Tokyo.

Shanghai's plunge is linked to widespread fears in the market following the Chinese government's decision to reduce the revenue of easy loans that have characterized the Chinese economy in recent years.

Since 2008 - the year when the crisis hit the "subprime" in the U.S. - China has made its march economy with aid packages dizzying (4 trillion yuan in only 2008-2009). But this has created high inflation and has exposed the banks to bad credits that risk insolvency.

In the first three months of this year China handed out loans to the tune of 7500 billion Yuan (more than 1200 billion U.S. dollars). In this way, the total amount of the Chinese economy outstanding credit has come to 200% of gross domestic product, a figure comparable to those achieved by the United States shortly before the subprime crisis.

The probable reduction in loans in the second half of the year is leading investors to reduce their expectations on economic growth, but is also raising fears that some borrowers-including many banks - cannot repay their debts.

Added to these fears is the United States Federal Reserve decision to reduce the program of "quantitative easing", further dimming prospects.

Until now China, the second largest economy, has driven many economies in the region. Analysts fear that a slowdown in China will also lead to a reduction of the economies of these countries, who live on exports to its powerful neighbor.

 

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