New Global Financial Crisis?

Published on Author bloomer


Some are preparing for a new global financial crisis due to the enormous “splurge” in Chinese lending and quality of lending in China’s shadow banking industry. This was prompted by two things: when a fund promoted by the Industrial and Commercial Bank of China almost defaulted, and the fact that China has lent around $15 trillion to fund a massive country-wide building spree.

Alarm bells have been ringing across trading floors, and some investors have been looking for a way to hedge against economic collapse in the future. Fears continue to increase as people analyze China’s “over-stretched, over-leveraged banking industry”. Some believe this to be an exaggeration, but the fact still remains that the default risk for China’s banks reached a six-month high last week. Whether these trends are a product of nervous markets or post-2008 wary analysts, only time will tell. Until then, China’s banking industry will be the receiver of much criticism and analysis.


One Response to New Global Financial Crisis?

  1. Why would a crisis in a portion of the domestic financial system in China spill over into the rest of the world? There are very few direct links, and would not a crisis would increase the attractiveness of non-RMB assets? Of course our interest rates are already zero….so it really won’t help us and certainly won’t hurt us.
    What have I left out? Oh, and go to the IMF China page to find formal analysis of “spillover” from China to the rest of the world, as there’s now a China section in the IMF’s global analysis of potential spillover among major economies.