ChinaTalk Is a Chinese Financial Crisis Looming?
Nov 12, 2020
Lauren Gloudeman and Logan Wright, members of the Rhodium Group, dive into the fragility of China's financial system. They discuss alarming issues like bank runs fueled by corruption and the fallout from the Baoshang Bank crisis. The duo highlights the precarious state of household debt and parallels to the U.S. pre-crisis environment. With a focus on state-directed credit and its global implications, they argue that perceived stability may be an illusion, revealing a landscape filled with vulnerabilities and urgent need for innovative financial indicators.
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Baoshang Bank Takeover
- In May 2019, Baoshang Bank, a major Inner Mongolian bank, was suddenly taken over by regulators.
- This unexpected move triggered concerns about the stability of China's financial system.
Baoshang's Risky Lending
- Baoshang Bank, while a traditional bank, engaged in risky lending practices similar to shadow banks.
- Its failure exposed interconnectedness and vulnerabilities within the Chinese financial system.
China's Unique Financial System
- China's financial system is unique and requires tailored risk assessment tools.
- Standard indicators may not capture China's controlled interest rates and interbank market dynamics.