GMO White Paper: Feeding the Dragon: Why China's Credit System Looks Vulnerable - By Edward Chancellor and Mike Monnelly

The conventional view is that China’s economy has recently experienced a "soft landing" and is now poised for take-off. In this white paper, GMO’s Edward Chancellor and Mike Monnelly tell a rather different story, namely that the Chinese credit system is displaying many of the indicators associated with rising financial instability – most notably, in the explosive growth of shadow banking instruments. As nonbank credit expands, "Red Capitalism" – that is, the ability of Beijing to control domestic credit for public policy purposes - is facing an existential threat.