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China Needs Bailout, Capital Plans for Crisis Event: PBOC's Ma

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(Bloomberg) -- People’s Bank of China adviser Ma Jun has probed the economy for triggers of financial turbulence, and proposed measures including direct bailouts of enterprises and bank re-capitalization should a crisis hit.

Property bubbles, local government contingent debt, the heavy reliance on land sales for financing or the shadow banking sector could set off a major crisis in China, according to Ma’s article[1] published on the Wechat account of PBOC-affiliated magazine China Finance.

He said actions should be taken in advance to prevent risks from materializing, including:

...

  • “Full attention” to smaller banks, such as joint-stock, city and rural lenders, as their role in generating systemic risks may “very likely exceed expectations”
  • Revision to the central bank law to enhance the PBOC’s ability to make decisions more independently and giving forward guidance
  • Allowing more types of financial institutions other than commercial banks to be able to participate in bond trading to improve the liquidity of the market
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