The Chart That Has Everyone Freaked Out About A Chinese Credit Crisis

The investing world recently watched in horror as the Shanghai Interbank Offered Rate (Shibor) went parabolic as the People’s Bank of China stood by.

Shibor is more or less the China’s version of LIBOR, an interest rate banks charge to borrow from each other. And during the darkest days of the last recession, surging LIBOR rates preceded the Lehman Brothers bankruptcy and the deepest periods of the financial crisis.

Shibor isn’t exactly like LIBOR. But it nevertheless is a proxy for financial stress.

And it got the whole world talking about a potential credit crisis in China.

Credit Suisse’s Andrew Garthwaite just published a big slide deck with this chilling chart.

“Private sector leverage is 17% above trend and on BIS analysis when its gets 10% above trends, there is a risk of a credit crisis,” said Garthwaite.

china credit crisis

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