According to J. Kyle Bass of Hayman Capital Management, China could be in line for an economic downturn four times worse than America’s “Great Recession.” Bass makes some predictions in an interview with Yahoo Finance, saying that China could be in line to lose $3 to $4 trillion. Julia La Roche reports:
In an interview with Yahoo Finance, Bass drew comparisons between the 2008 crisis, and what might happen if world’s second-largest economy hits a rough patch — which may happen as the U.S-China trade war escalates.
“In our crisis, we had $17 trillion worth of assets on balance sheet in our banks, and if you include non-banks, like Fannie and Freddie, let’s say we had $23 trillion,” Bass said on Monday.
“We lost about $850 billion of equity in our banking system in our financial crisis. China has $53 trillion worth of [yuan] of assets in their bank, and their economy is only $13 [trillion],” he estimated.
“I mean, guys, we lost less than $1 trillion,” the investor added. “I think they’re going to lose $3 to $4 trillion if they have a crisis.”
U.S. banks are in solid shape since the Great Recession ended, but haven’t been confronted with a bad economy in the 10 years since.
The battle between the U.S. and China has fanned fears that a slowdown might become a recession, but Bass said he wasn’t overly-concerned about the impact on the banking sector.
“The U.S. is in great shape. We can weather a recession. We always do,” Bass said. China, however, could be a different story.
“I think over there it’s going to be much harder to weather the enormity of the credit crisis they are facing,” he added.
Read more here.
Jeremy Jones, CFA
Latest posts by Jeremy Jones, CFA (see all)
- Stores Remake Retail to Fight Amazon’s “Transactional” Experience - August 22, 2019
- Have You Cut the Cord Yet with Cable? - August 16, 2019
- Incumbents Fight Back Against Amazon’s Rx Inroads - August 15, 2019