Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

China Economist

Kerry Liu

Macroeconomics

<p>The Chinese debt issue has been a major concern for investors and most analysts or investors rely on qualitative assessments. We hereby seek to examine the intra-financial system debt issue within the Chinese banking sector through our statistic model.  Based on quarterly data during 1Q08 – 3Q17, we found that the Chinese banking sector’s debt, the Chinese real economy, and monetary policy are interconnected.</p><p>Specifically, the declining return from the real economy is the dominant factor that contributes to the growth of intra-ﬁnancial system debts, and the quantity indicator of expansionary monetary policy also plays a positive role. We also review the recent policy responses from Chinese regulatory authorities, and conclude that these policy measures work, and concerns over the Chinese banking sector’s debt issue and the systemic risk of the financial system should be relieved, but more needs to be done.</p>

The Chinese debt issue has been a major concern for investors and most analysts or investors rely on qualitative assessments. We hereby seek to examine the intra-financial system debt issue within the Chinese banking sector through our statistic model.  Based on quarterly data during 1Q08 – 3Q17, we found that the Chinese banking sector’s debt, the Chinese real economy, and monetary policy are interconnected.Specifically, the declining return from the real economy is the dominant factor that contributes to the growth of intra-ﬁnancial system debts, and the quantity indicator of expansionary monetary policy also plays a positive role. We also review the recent policy responses from Chinese regulatory authorities, and conclude that these policy measures work, and concerns over the Chinese banking sector’s debt issue and the systemic risk of the financial system should be relieved, but more needs to be done.

MSCI AC Asia ex Japan Index (MXASJ INDEX)

Chinese Banking Debt: The Interconnection Through Statistical Model Lens