Risks to China’s financial system are increasing? - ANZ

Analysts at ANZ explained that he is widely expected to retire soon, but PBoC Governor Zhou Xiaochuan still appears as though he has a message to get across, and in an article posted on Saturday, it was a relatively blunt one. 

Key Quotes:

"He feels that risks to China’s financial system are increasing, and some of these risks are “hidden, complex, sudden, contagious and hazardous”. 

He believes the government should open up financial markets more, toughen regulations and reduce restrictions on non-Chinese financial institutions. It is also a pretty clear signal that officials wish to push on with a desire for the economy to deleverage."

"For markets that is a double-edged sword. On the one hand, lower debt and contained financial system risks would be highly favourable for the economy’s medium-term growth path."

"But on the other, the process of deleveraging is naturally a growth headwind and can certainly cause some wobbles and volatilities. Some see the fact that China’s 10-year bond yield has risen to a 3-year high is all part of this deleveraging theme."