Thursday, 4 July 2013

Fraser Howie on China: Expect Nasty Shocks to Bank Balance Sheets

By Ron Rimkus, CFA

Recent attempts by the People’s Bank of China to limit shadow banking sent commercial lending rates soaring and Chinese stocks into bear market territory. Given China’s importance to the global economy, we’re running a series of short interviews with leading China experts to assess the situation. In the first installment, we spoke with Michael Pettis, who is noted for his bearishness on China.

For the second installment, we interviewed Fraser Howie, coauthor of Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise and Privatizing China: Inside China’s Stock Markets. Only a month ago, Howie warned that the last decade’s growth in the shadow banking sector in China posed a serious systemic risk. And while it would be nice to offer a rosier contrast to Pettis’s assessment, as you’ll see from the interview below, Howie also thinks that China faces major challenges ahead.

Read the interview...

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