China’s Bad Bank Loans Should Serve as Warning

In “China’s Import Needs Make It as Much an Opportunity as a Threat” (Dec. 22), James Flanigan mentions but seems to gloss over the $500 billion in bad debt China banks are holding by describing it as “remnants of an earlier era.”

But that amounts to nearly 50% of China’s GDP. What indications do we have that the same people who made the bad loans in the past are not still making bad loans today?

My personal observation from simply going into some of the buildings in the Pudong area of Shanghai when I was there two years ago was that they were virtually empty. The Chinese are very proud of all the building that has taken place in Shanghai over the last 10 years -- they want the city to rival Hong Kong -- but if that much office space had been built in Los Angeles over the last 10 years, I suspect it would be empty also.

There is no doubt that there is a lot of manufacturing going on in China, but I am very skeptical about how willing the Chinese government will be to allow any significant value-added imports into their country.

Geoffrey Vanden Heuvel

Chino