#4.1 Will China face a banking crisis? Part 1

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In 2016, China has gradually started to unveil details of a restructuring plan of the national banking sector. The amount of bad debt on banks’ balance sheet has continued to rise as the economy is slowing down. Many commentators have shown concerns about rising risk in the banking sector. There is a precedent, in the 90’s the banking sector balance sheet was particularly alarming and the sector was entirely restructured to avoid a banking crisis. That lead to the question: Will China face a banking crisis?

We will answer in this episode the following questions:

1) How did the level of bad debt and risk evolved in the Chinese banking system?
2) What caused the degradation of the financial situation of Chinese banks?
3) How did banks’ exposure to shadow banking evolve?
4) What is the government’s plan for the banking sector and what effects can we expect?