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Reply #41: Yukon Huang: The real risks to China’s financial system [View All]

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Demeter Donating Member (1000+ posts) Send PM | Profile | Ignore Thu Nov-17-11 09:00 AM
Response to Reply #40
41.  Yukon Huang: The real risks to China’s financial system

The recent assessment of China’s financial stability by the International Monetary Fund highlights increasing vulnerabilities stemming from the government’s role in the lending process, and an inflexible interest rate policy.

Those who regard weaknesses in the banking sector as a likely trigger for a financial collapse have railed against China’s negative real interest rates and the speculative activity this has spawned.

They see the heavy reliance on credit expansion to stimulate the economy during the global financial crises as eventually leading to a surge in non-performing loans. All this is viewed as part of a strategy of financial repression that postpones the day when China’s big four state banks can operate as real commercial banks.

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http://link.ft.com/r/IOCBMM/PFBL7R/XBAN6/R3U0CW/167XWL/CM/t?a1=2011&a2=11&a3=17
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