2018-信用与信誉_中国经济弹性的风险（英文版）-4mb

Credit and Credibility: Risks to China's Economic Resilience

Core Content

This report, published by the Center for Strategic and International Studies (CSIS) in October 2018, examines the risks to China's economic resilience, particularly focusing on its financial system. Authored by Logan Wright and Daniel Rosen, the study explores how China's financial system has evolved over the past four decades and the implications of its rapid credit expansion for future stability.

Main Points and Key Information

Overview of China's Financial System Growth

• China's financial system has expanded at an unprecedented rate, growing twice as fast as its economy since 2000.
• By the end of 2017, China's banking system had grown 22-fold, reaching $38.4 trillion in assets.
• The financial system's growth has been a critical enabler of China's economic performance, though it has also introduced significant systemic risks.

Credit Expansion and Systemic Risks

• Over the past decade, China has experienced the largest credit expansion in over a century, with $29 trillion in new assets added since 2008.
• This expansion has led to a credit-to-GDP ratio that rose from 140% in 2008 to 231% in 2017, far exceeding the levels seen in other developing economies.
• The rapid credit growth has been driven by investment-led growth, especially at the local government level, and has created vulnerabilities in the financial system.

Financial System Resilience

• China's financial system was historically inefficient but stable, relying on conservative funding through deposits and lending to state-owned enterprises.
• However, recent growth has required loose monetary and regulatory policies, which have eroded the previous stability.
• The system has become more vulnerable due to increased reliance on non-deposit funding sources like wealth management products (WMPs) and shadow banking.

Political Credibility and Financial Stability

• The report argues that China's political credibility—its ability to assure markets of stability—has been a key factor in maintaining financial resilience.
• This credibility is built on a track record of successful interventions, but it is increasingly under pressure as the government seeks to reform the system and reduce implicit guarantees.
• Political factors, such as the balance of power between the state and financial actors, are more significant than economic fundamentals in explaining the system's resilience.

Risks of Financial Crisis

• The report suggests that China's financial stability is now at risk due to the changing political bargain and the need to roll back implicit guarantees.
• Financial reforms are necessary but challenging, as they require introducing market-based risk and default mechanisms that were previously absent.
• The probability of a financial crisis is more likely to be driven by domestic policy changes than by external shocks.

Implications for the United States

• The U.S. should not assume that China's financial system is immune to crisis, despite its current resilience.
• U.S. policy should be based on the assumption that China's credit growth will slow in the future, leading to lower GDP growth.
• The U.S. should not expect its external policies to be the main driver of Chinese financial policy, but rather recognize that domestic risks are reshaping the outlook.

Structure of the Report

Chapter 1: China's Economy and the Importance of the Financial System

• Reviews the historical context of China's economic growth and the role of the financial system.
• Notes the shift in focus from predicting crisis to explaining its absence.
• Highlights the need to understand the changes in the financial system over the past five years.

Chapter 2: Rapid Credit Growth and the Risk of Crisis

• Analyzes the legacy of the post-crisis response and the constraints on regulators.
• Discusses the diversification of the financial system and the challenges of restructuring bank assets.
• Examines the 2013 interbank market crisis and the implications for financial stability.

Chapter 3: Savings and Credit Distribution

• Explores the high savings rate in China and its role in credit expansion.
• Notes that savings are concentrated in areas that are harder to reallocate, limiting the ability to manage financial stress.

Chapter 4: "We Only Owe Ourselves"

• Debates the idea that China's internal debt reduces financial risks.
• Highlights the limitations of this argument, as domestic credit growth carries significant default risks.
• Discusses the role of the central bank and the challenges of financial reform.

Chapter 5: Politics in Command of the Financial System

• Examines the political interventions in financial markets, particularly in the property sector.
• Notes the shift in the political balance of power and the challenges of managing systemic risks without implicit guarantees.

Chapter 6: The Benefits of Credibility

• Defines credibility in China's financial system and its role in maintaining stability.
• Argues that credibility is a byproduct of past interventions and is now under pressure.
• Discusses the changing benefits and costs of the China model, including the risk of asset value declines and slower GDP growth.

Chapter 7: Outlook for China's Unusual Resilience

• Concludes with an assessment of the implications for China and the U.S.
• Suggests that China's stability is not guaranteed and that domestic risks are more likely to trigger a disruption.
• Advises U.S. policymakers to plan for a slowing credit growth and lower GDP growth in China.

Conclusion

The report underscores that while China's financial system has enabled remarkable economic growth, its rapid expansion has introduced significant risks. Political credibility has been a crucial factor in maintaining stability, but this is now being tested by the need for financial reform. The U.S. should recognize that China's resilience is not guaranteed and prepare for a potential slowdown in credit and GDP growth.