Are China’s Banks Next?
Despite its advantages, China harbors a weakness that is quite similar to what has caused so much trouble in the US and Europe: big banks that have an incentive not to be careful. While China may enjoy some years of greater prominence, its encouragement of its financial institutions to go global is likely to lead to serious trouble.
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WASHINGTON, DC – America’s recent bout of dysfunctional politics and the eurozone’s on-again, off-again crisis should, on the face of it, present a golden opportunity to China. To be sure, the malaise in the United States and Europe is likely to hurt Chinese exports; but, over the long term, China wants to reorient its economy toward domestic consumption. With the Tea Party wing of America’s Republican Party scaring investors out of the dollar, interest in the Chinese renminbi’s potential as an international reserve currency can only increase.