7 Feb 2014
Flash: China default risk to be increasingly discussed in the press - JPMorgan
FXStreet (Bali) - In the quotes below, Ying K Gu, Economist at JPMorgan, provides answers to better understand what are the broader signals investors should be tracking to be aware of the risks in China.
Key Quotes
"Standard economic data such as growth, BoP, etc. are not ideal indicators to track if the downside risk to growth comes from a liquidity crunch."
"Rather, we believe news on defaults or possible worrying developments in WMP and trust banking system will be leading indicators."
"We expect default risk to be increasingly discussed in the press, as a bankruptcy is inevitable at some stage. The key question is how defaults will be resolved when they occur."
"Currently the central government is still trying to use its own fiscal funding to bail out losses or ask strong financial institutions to step in. When and how the government will give up implicit guarantees will be critical, in our view. Investor confidence in the China growth story may be further dented when we approach the moment."
Key Quotes
"Standard economic data such as growth, BoP, etc. are not ideal indicators to track if the downside risk to growth comes from a liquidity crunch."
"Rather, we believe news on defaults or possible worrying developments in WMP and trust banking system will be leading indicators."
"We expect default risk to be increasingly discussed in the press, as a bankruptcy is inevitable at some stage. The key question is how defaults will be resolved when they occur."
"Currently the central government is still trying to use its own fiscal funding to bail out losses or ask strong financial institutions to step in. When and how the government will give up implicit guarantees will be critical, in our view. Investor confidence in the China growth story may be further dented when we approach the moment."