Category Archives: Uncategorized

Thoughts on the Peterson-Newman Interview and Perception vs Reality of Discrimination

The Atlantic recently featured a great article on modern debating and communication methods. The article discusses an interview/ debate (see here for original debate) between a University of Toronto psychology professor and clinical psychologist, Jordan Peterson; and a British journalist, … Continue reading

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The PBC’s exchange rate policy, the link to credit multipliers, and capital asset price volatility

With the US Federal Reserve beginning to contemplate shrinking the size of its balance sheet, it is a good time to review the evolution of central banks’ balance sheet since the Global Financial Crisis (GFC) and what they imply for … Continue reading

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Why is China so afraid of capital outflows?

There has been a new effort by Chinese monetary authorities to crack down on capital leaving the country in recent weeks. Quantitative and qualitative restrictions have been placed on Chinese firms trying to acquire foreign assets through the M&A process. … Continue reading

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The evolution of the Chinese banking system: Changing asset composition (Part 1)

Abstract: Since the Global Financial Crisis (GFC) there has been a material change in the way the Chinese banking system is channeling credit to the real economy. Prior to the GFC, most Chinese firms receive bank credit in the form of a loan. In subsequent years, many banks went from being in the business of loan generation to the security investment. The change the form of banking assets has a material impact in the way banks are accounting for the credit risk, provisioning and calculation of regulatory metrics. This change came because of stringent regulatory requirements the Chinese Banking Regulatory Commission (CBRC) placed on banks resulting in regulatory arbitrage. The process of regulatory arbitrage has led to the banking system outgrowing the current regulatory framework. The official metrics and rules that the CBRC presently use is outdated and no longer captures the rising risk in the system. Continue reading

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The quality versus the quantity of debt

A recent conversation with my boss prompted me to think about an interesting point. There seems to be a divergence in the way market commenters think about debt in China versus debt in developed economies. Every day in the headlines … Continue reading

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(Slightly) Positive PPI: The light at the end of the tunnel?

The Chinese Producer Price Index (PPI) finally recorded a positive growth rate of +0.1% in September 2016 after 52 months of negative growth (see Chart 1). One way to interpret this is to consider the government’s recent efforts to reduce … Continue reading

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Chinese Wealth Management Products: A Brief Introduction

An academic conference recently held by the Tsinghua PBC School of Finance featured some of China’s brightest academics presenting their latest research on various elements of the rapidly evolving Chinese financial system. A topic that was widely discussed was the situation regarding wealth management products (WMPs)- a relatively shadowy and potentially dangerous and destabilizing part of the Chinese financial system. I will use this piece to summarize my own understanding of the situation with WMPs: how we got here and what does the continual evolution of the WMP space mean for the Chinese financial system. Continue reading

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