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1/5
Chinese bond markets continue to suffer from the fallout of last month's SOE bond defaults. The fact that a handful of defaults could wreak so much havoc shows just how tightly the Chinese financial markets have been built around moral hazard. https://www.ft.com/content/0a0c427a-395d-4335-beba-46b6a37fdbdb
Chinese bond markets continue to suffer from the fallout of last month's SOE bond defaults. The fact that a handful of defaults could wreak so much havoc shows just how tightly the Chinese financial markets have been built around moral hazard. https://www.ft.com/content/0a0c427a-395d-4335-beba-46b6a37fdbdb
2/5
Regulators are trying to wean the financial system from implicit guarantees while limiting systemic risk. While there is a running debate about whether or not they can do so, I think it misses the point. As long as Beijing continues to target GDP growth rates that exceed...
Regulators are trying to wean the financial system from implicit guarantees while limiting systemic risk. While there is a running debate about whether or not they can do so, I think it misses the point. As long as Beijing continues to target GDP growth rates that exceed...
3/5
the real underlying growth of the economy, they need banks to lend into the non-productive activity of local governments and SOEs. Without implicitly or explicitly guaranteeing the bad lending behavior of the banking system, Beijing would have to abandon GDP growth targets.
the real underlying growth of the economy, they need banks to lend into the non-productive activity of local governments and SOEs. Without implicitly or explicitly guaranteeing the bad lending behavior of the banking system, Beijing would have to abandon GDP growth targets.
4/5
From what we are hearing about the 14th Five-Year Plan, clearly they are not yet ready to do that, in which case the regulators cannot fix the banking system. At best they can carve out a part of it in the hopes that it functions to serve the private sector...
From what we are hearing about the 14th Five-Year Plan, clearly they are not yet ready to do that, in which case the regulators cannot fix the banking system. At best they can carve out a part of it in the hopes that it functions to serve the private sector...
5/5
efficiently, but given the overwhelming role of the banks in corporate finance and in the bond markets, I think even this will be hard to pull off.
efficiently, but given the overwhelming role of the banks in corporate finance and in the bond markets, I think even this will be hard to pull off.
