The Chinese banking accident waiting to happen

An IMF report suggests Beijing is storing up huge problems in its disordely and opaque financial sys

A number of newspapers yesterday reported a warning by the International Monetary Fund about the health of China's banking sector. I'm surprised it hasn't been more widely discussed in the context of the generally dismal outlook for the global economy.

The IMF's analysis has some quite frightening implications. The general message is that the Chinese financial sector is full of hidden liabilities and is vulnerable to shocks from the bursting of a property bubble. It is written, as IMF reports always are, in arid technical prose, but the picture that emerges is one of a system that has become bloated and irresponsible thanks to a lack of regulatory and commercial rigour. Anyone know any other financial systems that meet that description?

The system is becoming more complex and inter-linkages between markets, institutions, and across international borders are growing. In addition, informal credit markets, conglomerate structures, and off-balance sheet activities are on the rise.

The scale of the risk was hard to assess because of a shortage of good data, which hardly encourages a generous interpretation of the situation.

Perhaps most alarming is the suggestion that Chinese banks have made heaps of loans based on political rather than commercial imperatives.

Banks' large exposures to state-owned enterprises, guaranteed margins provided by interest rate regulations, still limited ability and willingness to differentiate loan rates, coupled with the implicit guidance on the pace and direction of new lending, undermine development of effective credit risk management in the banks. It is important that banks have the tools and incentives to make lending decisions based upon purely commercial goals.

Given China's well-documented problems with corruption, that would imply that Chinese bankers have been doling out cash to their patrons and friends in state-owned companies. That situation can run along unchecked for a while, but at some point in its transition to a functional market economy Beijing will have to enforce some discipline in terms of which enterprises are bona fide and which are unprofitable make-work schemes - or worse, empty shells funneling cash to corrupt officials - supported by loose credit. It sounds as if any serious rigour along those lines would risk bank failures and even a systemic financial crisis. That can't be good.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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For the first time in my life I have a sworn enemy – and I don’t even know her name

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

Last month, I made an enemy. I do not say this lightly, and I certainly don’t say it with pride, as a more aggressive male might. Throughout my life I have avoided confrontation with a scrupulousness that an unkind observer would call out-and-out cowardice. A waiter could bring the wrong order, cold and crawling with maggots, and in response to “How is everything?” I’d still manage a grin and a “lovely, thanks”.

On the Underground, I’m so wary of being a bad citizen that I often give up my seat to people who aren’t pregnant, aren’t significantly older than me, and in some cases are far better equipped to stand than I am. If there’s one thing I am not, it’s any sort of provocateur. And yet now this: a feud.

And I don’t even know my enemy’s name.

She was on a bike when I accidentally entered her life. I was pushing a buggy and I wandered – rashly, in her view – into her path. There’s little doubt that I was to blame: walking on the road while in charge of a minor is not something encouraged by the Highway Code. In my defence, it was a quiet, suburban street; the cyclist was the only vehicle of any kind; and I was half a street’s length away from physically colliding with her. It was the misjudgment of a sleep-deprived parent rather than an act of malice.

The cyclist, though, was enraged. “THAT’S CLEVER, ISN’T IT?” she yelled. “WALKING IN THE ROAD!”

I was stung by what someone on The Apprentice might refer to as her negative feedback, and walked on with a redoubled sense of the parental inadequacy that is my default state even at the best of times.

A sad little incident, but a one-off, you would think. Only a week later, though, I was walking in a different part of town, this time without the toddler and engrossed in my phone. Again, I accept my culpability in crossing the road without paying due attention; again, I have to point out that it was only a “close shave” in the sense that meteorites are sometimes reported to have “narrowly missed crashing into the Earth” by 50,000 miles. It might have merited, at worst, a reproving ting of the bell. Instead came a familiar voice. “IT’S YOU AGAIN!” she yelled, wrathfully.

This time the shock brought a retort out of me, probably the harshest thing I have ever shouted at a stranger: “WHY ARE YOU SO UNPLEASANT?”

None of this is X-rated stuff, but it adds up to what I can only call a vendetta – something I never expected to pick up on the way to Waitrose. So I am writing this, as much as anything, in the spirit of rapprochement. I really believe that our third meeting, whenever it comes, can be a much happier affair. People can change. Who knows: maybe I’ll even be walking on the pavement

Mark Watson is a stand-up comedian and novelist. His most recent book, Crap at the Environment, follows his own efforts to halve his carbon footprint over one year.

This article first appeared in the 20 October 2016 issue of the New Statesman, Brothers in blood