risk prevention

risk prevention and control is the main tone of China’s economy in 2017, the central government is very concerned about financial risks. What do you think of this year’s financial risk?

Zhang Ming: In my opinion, China’s financial risk in 2017 is mainly reflected in the following three aspects.

First of all, some small and medium-sized deposits of financial institutions may face capital chain breaks, serious deterioration in asset quality, and even the risk of bankruptcy liquidation. Over the past few years, some city firms, agricultural firms and joint-stock banks in the so-called “corner overtaking” swiss replica watches efforts. The typical model is to raise funds through a large number of interbank deposits, interbank funds, through the commission of external asset management institutions to invest on behalf of the investment, through the various agencies to increase the various forms of leverage to invest in the original low rate of standardized financial Products (such as government bonds, financial bonds, etc.).

At present, these small and medium banks face three pressures: First, since the end of last year, with the rapid rise in interbank market interest rates, interbank deposit and interbank financing costs significantly increased. For example, the yield on interbank deposits has risen from about 3% last year to 5% -6%, which rolex replica means that the financing costs of small and medium banks are significantly increased. Second, as the current entity defaults into a high incidence period, the asset side of small and medium banks faces a significant risk of deterioration. Because many city firms, agricultural firms are in a limited area to carry out business, they are difficult to really diversify the investment risk. For example, a local important corporate debt default, for the local small and medium-sized banks may lead to systemic risk. Third, the current “three rows of” financial regulation has been significantly strengthened, the Chinese commercial bank’s shadow banking business has been significantly strengthened by the regulation. Considering that the dependence of small and medium banks on shadow banking is significantly higher than that of large commercial banks, this means that regulation strengthens the pressure on small and medium banks to be higher than that of large banks. In summary, due to the debt side, asset side and regulatory level at the same time facing greater pressure, do not rule out some small banks in 2017 face bankruptcy liquidation risk.

Secondly, in 2017, we may see more physical business defaults. In fact, the past few years, on the one hand, China’s economic growth has declined significantly; the other hand, China’s financial suppression of the environment is rapidly changing (as interest rate market, exchange rate market and the opening of the capital market results), this Leading to China’s financial risk is rapidly dominated, and a major  replica watches uk manifestation of dominance is a sudden increase in the phenomenon of default, as well as between the various markets of infection.

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