• Edward Lehman


That China gold-rush-era talking point about "crisis" and "opportunity" being the same word in Mandarin?

It's a myth, an exaggeration of the fact that weiji is composed of two characters, one meaning "danger", the other "opportunity".

China's current mountain of bad debt is no myth however, a rocky, $1.73T pile of NPLs and distressed assets, which could potentially avalanche into otherwise green valleys of GDP growth.

The situation is dire enough that regulators are hurrying to allow foreign access to China's distressed asset market, notably last year's permission of foreign financial institutions to set up domestic AMCs.

"Banks have been selling their bad debt to China's top four AMCs since 1999," says Edward Lehman. "But they don't have unlimited capital, or the appetite for the size and variety of the currently vast domestic distressed portfolio."

"The lion's share of these NPLs are in the real estate sector," says Jimmie Jeremejev. "We see a lot of golden opportunities, especially in the hospitality sector, available at fire sale prices, given the current, but not permanent, macro environment."

Thus do danger and opportunity remain inextricably linked. Our myths make us.

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