Is China heading for a 'Minsky Moment'?

The warning of China's central bank chief about the threat of a "Minsky Moment" has drawn close attention of the Chinese society.

At a press conference held on the sidelines of the 19th National Congress of the Communist Party of China (CPC), Zhou Xiaochuan, governor of the People's Bank of China, said in response to a question that when there are "too many pro-cyclical factors in an economy, cyclical fluctuations will be amplified", cautioning that the financial risks caused by excessive optimism could lead to a "Minsky Moment".

The "Minsky Moment" is a concept which refers to a plunge in asset values following unsustainable gains or the exhaustion of credit growth, named after Hyman Minsky, an economist who believed that long bull markets can lead to major collapses.

As early as 2014, a Morgan Stanley report pointed out that a "Minsky Moment" was nearing in China.

Zhou said that fending off the threat of a "Minsky Moment" is one of the key tasks for the government to avoid systematic financial risks.

A Financial Times report described Zhou's warning of the risks caused by "excessive debt and speculative investment" as "stark language", saying that Hong Kong's Hang Seng index closed down 1.9 percent at 28,159.09 after Zhou's remarks.

Some economists said that China's market value is overestimated due to a sharp rise in debt.

Earlier this year, Standard & Poor's downgraded China's sovereign credit due to concerns over rapid credit growth.

Some domestic media said Zhou's warning indicates the Chinese government has made preparation for a possible "Minsky Moment".

In his report delivered to the 19th National Congress of the CPC, Xi Jinping made maintaining the financial stability as a top task, stressing that a complete financial supervision system must be established to prevent the systematic financial risks.

At the press conference, Zhou mentioned the government's efforts to deleverage, reduce debt and stabilize the financial system.

Zhou said that China is entering the phase of deleveraging, with growth in broad money supply slipping to less than 9 percent.

Related Stories
Share this page
Touched Sympathetic Bored Angry Amused Sad Happy No comment

Beijing to build 250,000 shared ownership homes, pricing, rights sharing still unclearChina's shared charger sector to witness survival of the fittestPrimary school kids in Beijing amaze netizens with advanced research worksCPC Central Committee plenum makes full preparation for key congressChina's express delivery sector may finally adjust price upward: analystsMobike mulls launch of electric bike-sharing business: reportChina's online education providers succeed in fund-raising despite lossesChina catches up with US in applications as funding floods its AI sectorChina hastens the world toward an electric-car futureBig developers to become bigger in China’s slowing property industry: analysts
< Prev Next >