Michael Pettis is Professor of Finance, Guanghua School of Management, Peking University, author of The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy, Avoiding the Fall: China’s Economic Restructuring and The Volatility Machine: Emerging Economics and the Threat of Financial Collapse. Pettis is out with his latest missive on Chinese WMPs. Below is an excerpt from his latest newsletter.
There certainly will be more WMP scares. We have already seen two this year, the first of which was mysteriously “resolved”, and the second of which is still outstanding. The regulators are faced with the tough choice they always face when moral hazard has been taken to extreme levels, as it has in China.