CBRC crackdown

A helpful comment by Richard Balding, Professor of Economics at Peking University, on the reported crackdown by the China Banking Regulatory Commission (CBRC) on some of China’s most aggressive overseas investors:

Briefly on the matter of the Chinese regulators telling banks to review loans made to HNA, Anbang, Dalian, and others. I should note that parts here are speculative and anyone who tells you they really know really does not.

First, we should not be under any illusions that these firms are in anyway ethically or legally saints. At best they have pushed the boundaries of what even in China was considered legal and would definitely be allowed any place else.

Second, it is important to note that these firms were widely encouraged not just in their overseas acquisitions but their domestic build up. There is a mountain of evidence and other information that these firms were encouraged to do the behavior that is now being called into question. I do not mean to say this to necessarily defend them but more to provide context on these events.

Third, this begets the questions, so what exactly is going on? […]

I think the most likely explanation is that there are very real financial stresses. I think there is a wealth of evidence of increasing financial stress in Chinese markets. One thing that has become abundantly clear in Chinese markets is that problems arise unexpectedly and there is always a massive amount of information that should have been revealed before. I have no secret information but I believe this is the most likely explanation though others are always possible.

As usual, Chinese policy-making is a black box, and unless your job title includes the words “Central Committee of the CPC,” there is essentially no chance you understand what’s going on…

They know, you don’t