Chinese Financial Markets Reaching Tipping Point
Signaling the level of concern at the highest level of the Chinese communist regime, the National Institute of Finance and Development, a regime-affiliated think tank, published a report last week warning of “financial panic.”
The report said the Chinese economy may be on the edge of disaster, brought on by a combination of increasing bond defaults, currency depreciation, tightening lending and liquidity, and trade tensions with the United States.
The think tank warned stock purchases using margin (borrowed funds) have reached levels last seen in 2015, which is especially dangerous as investors rush to unwind positions to meet margins calls in a market downturn, further exacerbating an ongoing crash.
“After the 2015 stock market disaster, the leveraged funds on the Chinese market have not been seriously cleaned up. Instead, there has merely been ‘a change of clothes,’” the report said.
The study is also concerned that the ongoing Sino–U.S. trade tensions will have serious knock-on effects for the Chinese economy and financial markets.
“The combination of old and new factors is likely to lead to a high degree of nervousness in the financial market and a sudden increase in market risk, which in turn induces financial panic,” said the report.
Might come to nothing but note that the government itself is very concerned. This is no outsider warning of disaster. Risk is just piling up in Xina.