Emerging Markets Report: By this measure, China’s banking sector could implode within 3 years

If China doesn’t curb its addiction to debt soon, the country may find itself in the midst of a banking crisis in the next three years, the Bank for International Settlements warned.

China’s credit-to-gross domestic product gap reached 30.1 at the end of March, three times over the threshold that indicates elevated risks, the financial watchdog said in its quarterly review released Sunday.

The indicator measures increases in “excessive” debt and serves as a reliable early warning signal, according to the BIS.

The country’s credit-to-GDP gap has risen steadily in recent years, tripling from 6.7 in 2011 to 22.1 in 2014.

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