Credibility is Beijing’s Fragile Defense Against Financial Crisis
One of the most important factors driving the rapid growth of China’s economy over the previous decade has been the unprecedented expansion of the country’s financial system. Since the global financial crisis, bank assets have quadrupled to an astonishing US$39.5 trillion in 2018, roughly three times the size of China’s economy. This amounts to the largest single-country credit expansion in the last century.
Meanwhile, China has avoided the consequences that confront most emerging markets facing rapid credit expansions, including debilitating financial crises or sharp slowdowns in growth. How has China achieved this financial stability? And will it persist?