China will fend off risks from excessive optimism that could lead to a “Minsky Moment,” central bank governor Zhou Xiaochuan said on Thursday, adding that corporate debt levels are relatively high and household debt is rising too quickly. A Minsky Moment is a sudden collapse of asset prices after a long period of growth, sparked by debt or currency pressures. The theory is Zhou’s warnings of potential risks facing the world’s second-largest economy contrast with the rosier views of most Chinese officials, according to Reuters. “If there are too many pro-cyclical factors in the economy, cyclical fluctuations are magnified and there is excessive optimism during the period, accumulating contradictions that could lead to the so-called Minsky Moment,” Zhou was speaking on the sidelines of China’s 19th Communist Party congress. “We should focus on preventing a dramatic adjustment,” he said. China will control risks from sudden adjustments to asset bubbles and will seriously deal with disguised debt of local government financing vehicles.
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