The Political Economy of Killing Chickens and Scaring Monkeys

The regulatory scrutiny of a group of China’s private companies was tinged with politics but appears to be primarily a prudential effort to review potential financial risks linked to these firms’ overseas investment. The actions introduce new political risk and counterparty risk concerns within an already tense money market environment, in an opaque and interconnected financial system. They may also further weigh on outbound investment activity by China’s private sector, which has already slowed significantly in 1H 2017.

Posted August 1, 2017
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