Bloomberg (June 26)
“China is losing the war against shadow banking. Look beneath the headline numbers and you’ll see that activity is picking up, a sign of the economy’s overreliance on this opaque funding channel.” In the first quarter, “financing using trust assets climbed 4.4%” and the “proportion prone to default and repayment risks climbed to a record high of 90% from a year earlier.” Despite the talk of deleveraging, “what’s clear is that China needs its shadow banks now more than ever.”
Tags: China, Default, Deleveraging, Opaque funding, Overreliance, Repayment risks, Shadow banking, Trust assets
Wall Street Journal (January 9, 2014)
“Recent numbers and announcements out of Beijing suggest that one of the biggest global risks for 2014 is a Chinese economic slowdown. Five years after unveiling the most massive economic stimulus program the world has ever seen, the bills are coming due. And while a crash remains unlikely, deleveraging could uncover some nasty surprises in the financial system.”
Tags: Beijing, China, Crash, Deleveraging, Economic stimulus, Financial system, Risk, Slowdown
Euromoney (July 9)
“The new Chinese government’s policy drive to deleverage the banking sector has become more apparent, and that deleveraging will continue to unfold in the next six to 12 months. In what Morgan Stanley calls its ‘super-bear scenario’, it estimates that aggressive policy tightening will reduce Chinese GDP growth to an annual rate of 5.5% in the second half of this year.” If the scenario plays out (a one in ten chance according to Morgan Stanley), it “would have major implications for global markets.”
Tags: Banking sector, China, Deleveraging, GDP, Global markets, Government, Growth, Morgan Stanley, Policy, Scenario, Super-bear
The Economist (July 7)
“Deleveraging will dominate the rich world’s economies for years. Done badly, it could wreck them.” The countries that most ballooned their debt are now struggling to reduce it. This is having a major impact on spending and economies. Moreover, citing analysis by the McKinsey Global Institute, attempts to reduce debt have only just begun. For example, “the ratio of total debt to GDP in both America and Britain has fallen by just over ten percentage points from its peak—a fraction of the scale of debt reduction in a typical deleveraging period.”
Tags: Debt, Deleveraging, McKinsey, U.S., UK
