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GMO: China Is Marching Toward A Massive Credit Crisis

Mamta BadkarJan 28, 2013, 10:00 IST

Screenshot Colum Murphy/WSJChina has passed many reforms aimed at easing capital controls. But these are being rolled out slowly.

A meager deposit interest rate has forced people to turn to wealth management products and other risky investments. And the recent credit crunch forced many into the unregulated shadow banking system.

In a new report, GMO's Edward Chancellor and Mike Monnelly warn of "acute fragility" in China's financial system, and write, "the public appearance is of a banking system with negligible levels of bad debts, ample liquidity, and low leverage. The reality, on closer inspection, looks rather different".