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'China very likely to see financial panic' says leaked think tank report

A leaked report from China's National Institute for Finance and Development is predicting financial woes for the world's second largest economy

(Public Domain Images)

(Public Domain Images)

TAIPEI (Taiwan News) – According to a leaked document from China’s National Institute for Finance and Development (NFID), China’s government and the country’s banking and finance sectors are preparing for“financial panic.”

An internal financial report warning of financial woes for China was leaked this week. The reported was accessed by journalists at Bloomberg, and confirmed by a member of the CCP backed think tank.

The document, intended for internal review and discussions, appeared briefly online Monday, June 25 before being removed. However, several news outlets have archived the document.

The report says that bond defaults, liquidity shortages and a recent financial downturn in the midst of worsening trade relations with the U.S. may set China on a course for some serious financial difficulties over the coming years.

According to Bloomberg, the report explains that China’s leveraged purchases of market shares have reached the same levels they did in 2015, which preceded a considerable crash that saw a loss of US$5 trillion.

The NFID report urges the Chinese government to be ready to step in with full financial support in the event of any major defaults, or a market crash. The report says that “preventing (the financial panic’s) occurrence and spread should be the top priority for (China’s) financial and macroeconomic regulators over the next few years.”

The NFID also says that China has failed to address the poorly leveraged stock purchases that led to the market shocks in 2015. China “failed to clean up the leveraged funds after the 2015 market rout; they have staged a comeback in a new guise," reads the report, as quoted by Bloomberg.

The article also suggests that many in the Chinese government and financial sector are very concerned about the effects of a sustained trade conflict with the U.S.

The NFID warns that Chinese government’s Central State Council should have adequate “market support measures” in place, in coordination with government ministries, along with law enforcement protocol, prepared in the event of the predicted “financial panic.”