Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission and Party Secretary of the central bank, does not mince words and said he was “very concerned” about the risks arising from bubbles in global financial markets and the sector. nation’s real estate, This raised new concerns about further adjustment in the world’s second-largest economy.
The bubbles in the US and European markets could burst because their rallies are heading in the opposite direction from their underlying economies and they will have to face corrections “sooner or later,” he said.
The shock to Chinese equities was swift: The CSI 300 Index fell as much as 2.1% to lead declines in Asia, while Kweichow Moutai Co., the largest contributor to earnings during the 2020 stimulus cycle, fell nearly a 5%.
Central banks around the world are faced with the challenge of when and how to reduce stimulus as economies recover from the pandemic. Global bond markets tumbled last week as traders advanced their bets on interest rate hikes, and the yield on 10-year Treasuries hit the highest level in a year.
Deleveraging has particular resonance in China, where it is a key priority of President Xi Jinping given the size of the nation’s debt mountain. A crackdown on leverage in 2017 sent corporate and government bond yields hit multi-year highs before officials halted momentum a year later amid the worsening trade war with the US.