Books

04.12.18

China’s Great Wall of Debt

Dinny McMahon
Houghton Mifflin Harcourt: Over the course of a decade spent reporting on the ground in China as a financial journalist, Dinny McMahon gradually came to the conclusion that the widely held belief in China’s inevitable economic ascent is dangerously wrong.In this unprecedented deep dive, McMahon shows how, lurking behind the illusion of prosperity, China’s economic growth has been built on a staggering mountain of debt. While stories of newly built but empty cities, white elephant state projects, and a byzantine shadow banking system have all become a regular fixture in the press in recent years, McMahon goes beyond the headlines to explain how such waste has been allowed to flourish, and why one of the most powerful governments in the world has been at a loss to stop it.Through the stories of ordinary Chinese citizens, McMahon tries to make sense of the unique—and often bizarre—mechanics of the Chinese economy, whether it be the state’s addiction to appropriating land from poor farmers, why a Chinese entrepreneur decided it was cheaper to move his yarn factory to South Carolina, why ambitious Chinese mayors build ghost cities, or why the Chinese bureaucracy was able to stare down Beijing’s attempts to break up the state’s pointless monopoly over the distribution of table salt.Debt, entrenched vested interests, a frenzy of speculation, and an aging population are all pushing China toward an economic reckoning. China’s Great Wall of Debt unravels an incredibly complex and opaque economy, one whose fortunes—for better or worse—will shape the globe like never before.{chop}

Chinese Shadow Banking Has Slowed — but That's Not as Good as It Seems

Huileng Tan
CNBC
China is on a drive to reduce its reliance on debt, a habit that some experts warn could lead to a global financial crisis.

Conversation

08.03.17

As China Reins in Capital, What Next for Global Trade?

Yu Zhou & Peter Knaack
China’s Communist Party and its leader, Xi Jinping, are tightening controls on overseas spending by the country’s biggest companies and their highly visible billionaire CEOs. The Wall Street Journal reported recently that Xi personally signed off on...

China’s Banks Are Now Stable as ‘Shadow’ Banking Looks Less Threatening, Moody’s Says

CNBC
Moody’s Investors Service no longer takes a negative view on China’s banking system, raising its outlook to stable on Thursday as concerns over so-called shadow banking eased.

China Shadow Banking Is Slowing amid More Coordinated Government Measures, Says Moody’s

Huileng Tan
CNBC
Growth in shadow banking in China is slowing due to coordinated government action to contain systemic financial risks, a development that will benefit banks, although it will also bring adjustment risks.

Books

06.20.17

Shadow Banking and the Rise of Capitalism in China

Andrew Collier
This book is about the growth of shadow banking in China and the rise of China’s free markets. Shadow Banking refers to capital that is distributed outside the formal banking system, including everything from Mom and Pop lending shops to online credit to giant state owned banks called Trusts. They have grown from a fraction of the economy 10 years ago to nearly half of all China’s annual 25 trillion renminbi (U.S.$4.1 trillion) in lending in the economy today.Shadow Banks are a new aspect of capitalism in China—barely regulated, highly risky, yet tolerated by Beijing. They have been permitted to flourish because many companies cannot get access to formal bank loans. It is the Wild West of banking in China. If we define capitalism as economic activity controlled by the private sector, then Shadow Banking is still in a hybrid stage, a halfway house between the state and the private economic. But it is precisely this divide that makes Shadow Banking important to the rise of capitalism. How Beijing handles this large free market will say a lot about how the country’s economy will grow—will free markets be granted greater leeway? —Palgrave Macmillan{chop}

China’s New Banking Regulator Chief Faces Daunting Challenges

Bloomberg
China has appointed Guo Shuqing as the new head of the banking regulator, according to people familiar with the matter. Guo, 60, faces daunting tasks ahead as he takes on oversight of the world’s largest banking industry by assets.

China, the Death Star of Emerging Markets

William Pesek
Bloomberg
On any list of banking accidents waiting to happen, China is assured a place at the very top. But could a crash there take the entire global economy down with it?

Chinese Trust Fund Avoids High-profile Default

Simon Rabinovitch, Josh Noble
Financial Times
One of China's biggest “shadow banks” raises Rmb3bn from investors, which was backed by a coal mine which later collapsed. ...

I.M.F. Says China Needs Reform to Keep Growth Success

Reuters
China needs another round of “decisive measures” to make sure it continues its successful economic growth as its margins of safety are falling amid growing domestic problems, the International Monetary Fund said in its latest report. 

Shadow Banking Threatens China's Economy. But What is it, Exactly?

Ryan Perkins
Atlantic
Last week, the Shanghai interbank offered rate (Shibor), made news around the world when it suddenly spiked at all time high. Expected to lower this rate by injecting cash into struggling Chinese banks, the People's Bank of China instead did...