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China faces ‘acid test’ over credit bubble

Article by Michael Mackenzie:, 19/05/2017

This is a Financial Times Long View piece on China’s debt bubble, summarising a discussion I led with an audience at the FT on 15th May.

Investors shouldn’t take their eyes off China as the 19th Party Congress looms

For global investors and, indeed commentators, China remains a fascinating subject and one that carries a health warning. Nearly a third of fund managers say the recent tightening of credit by authorities in Beijing, who are taking aim at the shadow banking sector, is now the biggest tail risk for markets, according to a Bank of America Merrill Lynch survey released this week. Not since January of 2016 has China ranked above the threat of a eurozone break-up as the biggest worry for investors. The catalyst has been Beijing’s belated effort to bring an enormous credit bubble under control. As a result, interbank lending rates have shot up, while five-year bond yields have risen above those of the 10-year sector — both signs of financial tension that reflect the crackdown on leverage….Read more:

Photo by adam morse on Unsplash