Is China About To Plunge Into Financial Crisis?

China News

Is China about to have its own Bear Stearns moment? I have been thinking a lot about this after reading a smart report released today by BofAMerrill Lynch Chinese economist Bin Gao, which looks at the recent debt restructuring at the China Credit Trust Co., a major Chinese financial institution. Just a few days ago, the Beijing based company was in danger of defaulting on a high risk, complex debt product. Then, suddenly, it managed to get its hands on enough money to restructure the half a billion-dollar deal and prevent the debt from going bad. Nobody knows who the investor was—the central government? a worried Chinese billionaire? As if that wasn’t bad enough, the secret bailout comes at a time when intra-bank lending rates in China are rising (which means banks don’t trust each other), market volatility is increasing, and the value of risky debt products is…

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