China needs bailout and capital plans for crisis event: PBOC Advisor
- China needs contingency plans for a financial crisis, an advisor to the Chinese central bank said
People’s Bank of China adviser Ma Jun has probed the economy for triggers of financial turbulence, and proposed measures including direct bailouts of enterprises and bank recapitalisation should a crisis hit.
Property bubbles, local government contingent debt, the heavy reliance on land sales for financing or the shadow banking sector could set off a major crisis in China, according to Ma’s article published on the Wechat account of PBOC-affiliated magazine China Finance.
He said actions should be taken in advance to prevent risks from materialising, including:
-- “Full attention” to smaller banks, such as joint-stock, city and rural lenders, as their role in generating systemic risks may “very likely exceed expectations”;
-- Revision to the central bank law to enhance the PBOC’s ability to make decisions more independently and giving forward guidance;
-- Allowing more types of financial institutions other than commercial banks to be able to participate in bond trading to improve the liquidity of the market;