Jeff Dawson (Federal Reserve Bank of New York) - China’s Stealth Financial Crisis

BOFIT seminars

BOFIT Seminar - Jeff Dawson (Federal Reserve Bank of New York) - China’s Stealth Financial Crisis

Co-author: Hunter Clark (Federal Reserve Bank of New York)

Abstract
China’s largest – and best known – financial crisis and subsequent banking system cleanup occurred in the late-1990s in the run-up to China’s WTO accession and amid major reforms to strengthen and modernize its financial system.  In the ensuing 25 years, additional rounds of banking sector cleanups and periods of financial stress in China have been frequent. Only the 1998 episode in China is classified as a fully-fledged, “systemic banking crisis” as defined in the economic literature. Instead, China has had a series of what might be viewed as “stealth financial crises”, which includes current problems in the property and local government sectors. This work focuses on China’s financial condition and estimates current and potential future costs, which are large in the global historical context, and considers China’s banking system stress and restructuring costs in terms of implications for future economic performance in the country and spillovers globally.

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