According to analysts at ANZ, the seizure of Baoshang Bank in May has triggered concerns about credit risks of Chinese financial institutions with low credit ratings.
Key Quotes
“Recent efforts by Chinese policymakers to provide assistance have included the use of multiple monetary policy instruments and window guidance.”
“Many Chinese issuers/debtors with lower ratings, especially small and medium enterprises (SME), rely on high risk institutions to finance their operations; it is thus not surprising to see credit contraction subsequently. In response, the State Council has asked the People’s Bank of China (PBoC) to ensure adequate liquidity and reform the current interest rate system to lower the financing cost of SMEs. However, it may take a long time before these plans become reality.”
“Event risks will pose a problem to the progress of supply-side structural reforms in China’s financial sector. Given the overall quality of China’s banks and its financial stability, however, we think systematic risks are low.”
Share
