Coronavirus crisis burdens China’s credit system

The economic consequences of the Covid 19 pandemic pose new threats to China’s fragile financial system. As Michiel Haasbroek, Visiting Academic Fellow, MERICS (Mercator Institute for China Studies), writes, small regional banks that serve small and medium-sized enterprises (SMEs) are particularly vulnerable. These smaller banks have weaker risk management and lower capital buffers. Any increase of risk on borrower level may have a direct impact borrowing on the costs and the availability of financing for corporations.

However, the full extent of the risks will depend on the speed of China’s domestic recovery, the global economy, regulatory intervention and other specific measures to promote stability.

Read more at merics.org