Kyle Bass (Trades, Portfolio) believes the Chinese banking system is "too big for its britches."
The Chinese banking system is three times the size of China's GDP. The banking system has grown four times in the past decade, and it is time for it to experience a loan loss cycle.
He believes that Chinese banks will lose all of their equity when that happens. That is manageable with the government of China able to recapitalize them.
What will happen, though, is that the amount of lending is going to decrease dramatically, and it is going to hit banks in Asia outside of Chin,a which is what Bass is targeting with his short book.
