The release of China's second quarter GDP will sharpen focus on the health of its debt-fueled economy, but Beijing has announced new measures to rein in risk.
The People's Bank of China, the country's central bank, has been given a beefed up role in managing systemic risk by President Xi Jinping. Reutershas the details :
Speaking at the National Financial Work Conference, Xi said China would set up a financial stability committee under the State Council, boost the People's Bank of China's (PBOC) role managing financial risks and create more cohesive regulation.
"We will strengthen the PBOC's role in macro-prudential management and in averting systemic risk," Xi said, adding the country would increase the accountability of regulators and the supervision over regulatory bodies.
Ahead of the closed-door event, economists had widely expected the meeting to focus on how the central bank could better coordinate with the country's three main financial regulators to manage risk in the financial system.
China's markets have been surprisingly quiet after the rout of 2015 but analysts are concerned that investors may be too complacent. Bloomberg has a story warning investors not to fall for the sense of calm in China's markets :
A sense of calm has descended on China's markets after a flurry of activity from financial regulators. While it's emboldening investors, analysts are waiting for the storm.
Liquidity has come roaring back after a dry spell during April and May, when President Xi Jinping ordered a check of China's financial system and an intensified focus on deleveraging saw mainland debt and equities sell off. That, coupled with what seems like a lull in Beijing's regulatory fervor, has sparked a resumption in corporate bond buying and a return to borrowing as speculation takes hold that the worst of the crackdown may be over.
To market watchers from Pacific Investment Management Co. to Australia & New Zealand Banking Group Ltd. and Standard Chartered Plc that's a concern -- not least because the efforts so far have barely budged leverage levels.
On the issue of leverage, The South China Morning Post has an interesting story looking at the growth in Chinese bond issuance and how almost every new issue gets a AAA rating :
There are several reasons foreign investors are afraid of putting their money into China's massive debt market. One of the biggest is a suspicion of the country's rating agencies who seem to undermine their own credibility by giving just about every bond the highest classification.
According to some of the nation's top economic analysts and bond market players, it is the fault of the organisations that oversee the industry.
"A lot of people blame China's rating agencies for adopting loose standards when evaluating the bond issuers. But they do not understand, it is not our fault - it's the regulators," said Mao Zhenhua, founder and chief economist of China Chengxin International Credit Rating, one of China's four biggest rating agencies, on Sunday in Beijing.