Research by the Federal Reserve Bank of New York indicates a signal of financial strain in China.
- Globally, tensions in financial markets have eased considerably since spring 2020. Although Chinese financial conditions are at historically average levels, they are lagging behind the rest of the world. Given the relatively large degree of co-evolution in financial conditions between countries, this suggests that a potentially large build-up of stress in China’s domestic financial markets has been masked by conditions abroad. The domestic component of our index of financial market stress in China indeed reveals that tensions in domestic financial markets have increased since the start of 2021. Although its peak in October was lower than the levels observed at the start of 2020, the still high stress level signaled a substantial downside risk to China’s growth outlook.
Boldness is mine.
If you were there earlier, you will notice that China is not withdrawing its stimulus measures:
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