Shuli Ren from Bloomberg says, “China’s financial system seems on the brink of collapse.”
Mr. Ren asks, “How can China’s Lehman moment not be here already?” Unlike in the U.S. where large firms simply unload their recourse and non-recourse bad properties to the banks, China continues to refinance these loans with special bonds. This has continued for many years with some arguing the problems will emerge as a currency crisis, especially, with higher interest rates in The West now. He agrees that the system needs to be flushed out of mal-investment. This may help the youth unemployment rate by giving the unemployed a new lower basis from which to create real and durable economic growth. A number of articles published the last two days indicate a potential culmination of China’s crisis.
But would the United States and The West – even after post Covid de-risking – catch a cold from China if its crisis culminates?
https://www.telegraph.co.uk/business/2023/08/22/china-on-verge-economic-social-implosion/