#4.1 Will China face a banking crisis? Part 1

12/05/16 • 17 min

To visualize data go to chinaeconomypodcast.com In 2016, China has gradually started to unveil details of a restructuring plan of the national banking sector. The amount of bad debt on banks’ balance sheet has continued to rise as the economy is slowing down. Many commentators have shown concerns about rising risk in the banking sector. There is a precedent, in the 90’s the banking sector balance sheet was particularly alarming and the sector was entirely restructured to avoid a banking crisis. That lead to the question: Will China face a banking crisis? We will answer in this episode the following questions: 1) How did the level of bad debt and risk evolved in the Chinese banking system? 2) What caused the degradation of the financial situation of Chinese banks? 3) How did banks’ exposure to shadow banking evolve? 4) What is the government’s plan for the banking sector and what effects can we expect?

Previous Episode

#3 Mr Trump, is China a currency manipulator?

You’ve probably noticed that during the first US presidential debate, besides “China” you can quite often hear the world “currency manipulator”. Indeed, besides claiming that China was ”stealing US jobs”, Donald Trump’s condemns China as a currency manipulator. Well is China a currency manipulator? Let’s find out. In this episode of China Economy Podcast we will answer the following questions: 1) What is a currency manipulator? And what does that imply for the US and China? 2) How did the Chinese foreign exchange regime evolve during past decades? 3) What is the Chinese foreign exchange regime today? 4) Let’s fact check and answer to Donald Trump’s claim, is China a currency manipulator? Visualize data

Next Episode

#4.2 Will China face a banking crisis? Part 2

chinaeconomypodcast.com Part 2 of our episode on the Chinese banking system. We have seen in the first part that the level bad debt (NPL) in the Chinese banking sector has increased in later years. The Chinese NPL level is actually low by international comparison. However, this is due to a large extent to the differences in accounting standards that tend to underestimate NPL level in China. Another risk measurement method indicates that the level of risk in the sector is actually high. In parallel of the increase in risk, the profit in the banking sector has decreased. These evolutions are due to the slowdown of industrial activity and to the increase in competition linked to the interest rate liberalization and to the development of money market funds. While we are still waiting for my bank counselor let me answer the following questions: How did banks’ exposure to shadow banking evolve? What is the government’s plan for the banking sector and what effects can we expect? Reading suggestions: China Economy Watch by the Peterson Institute for International Economics where you will be able to read pieces by Nicolas Lardy, my personal hero Michael Pettis’ blog from Beijing University and the Carnegie Endowment Andrew Batson’s blog on China, books, economics, jazz, history, et cetera by the Research Director of Gavekal Dragonomics Bulletin Economique Chine on Chinese economic current affairs in French by the French Treasury