Beijing’s Credibility and the Baoshang Bank Dilemma

Following the Baoshang Bank seizure on May 24, Beijing’s dilemma between financial reform and financial stability is clearly in view. Only administrative pressure on large banks to maintain short-term lending to risky institutions is currently preventing a larger credit crunch. The interbank market tension is weakening Beijing’s overall control over China’s macroeconomy, and despite assurances of stability, we expect additional credit events and financial system turbulence.

Posted July 26, 2019
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