China’s $9 T Moral Haz­ard is Now Too Big to Ig­nore

The Economic Times - - Companies: Pursuit Of Profit -

Lo­evinger, a for­mer China spe­cial­ist at the US Trea­sury who’s now an an­a­lyst TCW Group Inc. in Los An­ge­les, which over­sees about $191 bil­lion, said by e-mail. “But see­ing is be­liev­ing. Say­ing in­vestors won’t get bailed out is im­por­tant, but you have to show them you mean it.”

For Pres­i­dent Xi Jin­ping’s gov­ern­ment, it’s a par­tic­u­larly sen­si­tive time to be shak­ing up an in­dus­try that man­ages as­sets worth more than three-quar­ters of China’s gross do­mes­tic prod­uct. Pol­icy mak­ers have been plac­ing an em­pha­sis on fi­nan­cial sta­bil­ity as the rul­ing Com­mu­nist Party pre­pares for a twice-a-decade lead­er­ship reshuf­fle later this year. They also need to grap­ple with a host of other risks, from a po­ten­tial trade war with Amer­ica to po­lit­i­cal up­heavals in Europe and North Korea’s nu­clear pro­gram. His­tory sug­gests Bei­jing may have a hard time fol­low­ing through on re­forms. One of the big­gest tests of the im­plicit guar­an­tee on trusts — sold to wealthy in­di­vid­u­als — came in 2014 when a prod­uct called Credit Equals Gold No. 1 lacked the funds to re­pay in­vestors. The trust, which was sold to clients of state-run In­dus­trial & Commercial Bank of China, was even­tu­ally bailed out by uniden­ti­fied buy­ers af­ter the episode roiled mar­kets around the world.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.