Bloomberg has published a very interesting article arguing that China’s economy and financial system might be on the edge of implosion. The publication mentions that the government’s bailout of Baoshang Bank last month has put money markets on edge, and for the first time, short-term lending between big institutions has started to freeze up. For the first time in decades, lenders are facing the prospect of defaults and haircuts on loans to other financial institutions. This has led funding costs for companies to shoot higher.
FINSUM: As is the norm with China, we have little direct insight into this. However, if you take a step back and look at the overall pressure on the economy from the trade war and combine it with the data above, it does sound like something very nasty could be brewing.