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How China Is Getting Serious About Financial Risk

Xi Jinping
Xi JinpingPhotographer: Qilai Shen/Bloomberg
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China is getting real about dangers in its financial system. While de-risking has been the government’s mantra since 2015, the country’s most powerful politicians have been ramping up directives on everything from excessive borrowing to stock-market speculation. Those efforts have gained momentum since October’s Communist Party Congress, where leaders pledged to make controlling financial risk a top priority. Their challenge is to do so without derailing the economy.

No, so far. Beijing seems to prefer slowing debt growth to actually cutting the overall stock. Top leaders said in December they will prevent systemic risk, omitting a "deleveraging" pledge from prior years. The government said in 2016 it would "control" overall debt and "reduce" corporate borrowing. In January, top bank regulator Guo Shuqing told state-run People’s Daily there’s a need to "dismantle" the shadow banking sector and "suppress" household leverage.