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China’s Tightening Measures to Continue But Risks Remain if Markets Pushed Too Hard 

May 3, 2017

Celia Chen, SCMP

China’s financial authorities expect to continue their supervisory tightening in a gradual and phased manner, but the full impact on markets will depend how strictly the new rules are interpreted and enforced, said analysts.

“Strict enforcement of all the recent rules could lead to a sharp and disorderly unwinding of the interbank positions and some shadow bank investments, leading to serious liquidity concerns in the market,” said Wang Tao, an economist at UBS.

China’s financial authorities have tightened supervision and regulations in recent weeks, with the China Banking Regulatory Commission (CBRC) leading the latest wave of measures and announcements.

Banks’ liquidity and credit risk management, wealth-management products (WMPs) and links with non-bank financial institutions (NBFIs) are key areas facing more scrutiny, Wang said.

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