China may have $1.3 trillion loans extended to borrowers that don’t have sufficient income to cover interest payments, with potential losses equivalent to 7 percent of the country’s gross domestic product, according to the International Monetary Fund. Bloomberg reports loans “potentially at risk” would amount to 15.5 percent of total commercial lending, the IMF said in its latest Global Financial Stability Report. That compares with the 5.5 percent problem loan ratio reported by China’s banking regulator after including nonperforming and special-mention loans. The IMF said loans potentially at risk aren’t the same as nonperforming loans reported by banks and supervisors.
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