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Kyle Bass - China's real problem is its banking sector  ( Original )
SEP 16, 2015

Chinese banks will likely experience losses that may affect the country as a whole. 

"Those that are watching whether Chinese stocks go up or down aren't paying attention, in my opinion, to what the real problem is," Bass said. "And the real problem is the loans in this banking sector."

"When you run a bank expansion that aggressively, that quickly, you're going to have some losses," he said, adding that "the scary thing about that" is a "likely" 10 percent asset loss in that banking sector would amount to $3 trillion. 

Such losses would force China to use much of its foreign exchange reserves (which stand at about $3.6 trillion) and sell bonds to recapitalize the banking system, he said. 

"We talk about this race to the bottom and this currency war. Well it's happening as we speak," he said. "China literally just started with its devaluation process—wait until you see where that goes."