Hard Landing for China’s Banks?

Published on: 2017-06-23

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China’s banking sector is over-leveraged, risking financial instability warns Faculty Associate Alicia Garcia-Herrero in a Bloomberg Radio interview.

When asked whether concerns for a hard landing in China are exaggerated, Garcia-Herrero responded “in terms of economic activity, they are, but in terms of financial stability, they aren’t.”

Prof Garcia-Herrero, who is also Chief Economist (Asia Pac.) at NATIXIS bank, remarks that the risk of instability has less to do with capital markets and more to do with banks.

“Today, Chinese banks are actually larger than European banks. We’re talking 15 trillion dollars in assets in China–a massive endeavor for any regulator to deal with.”

Commenting on neighboring developing economies, which rely on China’s growth to drive their own, Alicia remarked “their resilience has been quite impressive.” For Alicia, the worry lies not Asia’s smaller developing economies, such as ASEAN members, but with China.

Listen to interview at Bloomberg.com.

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Photo Credit: Daniel Chodusov, (CC BY-ND 2.0) https://flic.kr/p/izXfSN

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