A Chinese government think tank has warned of “financial panic” caused by bond defaults, liquidity shortages and market turmoil, Bloomberg reports after seeing a leaked report.
In a rare display of anxiety from a Beijing-backed economic body, the National Institution for Finance and Development wrote that China is “very likely to see a financial panic,” prevention of which should policymaker’s top priority in coming years.
The report points out that leveraged stock purchases have reached about RMB 5 trillion ($760 billion), surpassing the levels of 2015 before the market crash, but the government has yet to address the issue.
“We failed to clean up the leveraged funds after the 2015 market rout; they have staged a comeback in a new guise,” the NIFD report said.
The report also recommends that Beijing should be on standby with full financial support should markets take a tumble, rather than smaller, stepwise responses.