[Asia Round-up] China’s shadow banking

Editor’s note: Followings are summaries of editorials from major Asian media on current issues.

(Photo : AP/NEWSis)

China’s shadow banking

The so-called “Fragile Five” have been scrambling to raise interest rates to curb inflation: Turkey, South Africa and India have all done so. This matters to Malaysia though its economy is fairly resilient. China’s economy, Southeast Asia’s engine of growth, is still growing at a stable 7% this year, and China’s tight capital controls shield it from the United States’ tapering of its quantitative easing. But, Beijing is facing a potent threat in its shadow banking system. As China has become reliant on informal sources of financing, loans from shadow banking are currently as high as 47 trillion yuan (84% of GDP). Shadow banking institutions such as hedge funds are highly unregulated. China’s financial system is fragile behind fabulous wealth management products. The debt levels in China have soared from 130% of its GDP to more than 200% today. There are eerie parallels with what is going on in China now to the US financial services industry pre-2008 crisis. Southeast Asian economies will be vulnerable to a Chinese meltdown. The Star, Malaysia

China-Taiwan meeting marks ‘new-era’ in cross-strait ties

The relationship between China and Taiwan has entered “a new era” at the first government-to-government meeting in Nanjing, China on Feb 11, 2014. Wang Yu-chi, chairman of Taiwan’s Mainland Affairs Council (MAC), told his mainland counterpart Zhang Zhijun, director of China’s Taiwan Affairs Office (TAO), that sitting across the table and formally discussing affairs of mutual interest marks a “historic moment.” Underscoring Beijing’s eagerness to move further on cross-strait ties, Zhang stressed that the two sides must continue building on the “hard-earned” propitious event. The two sides discussed the participation in the multi-lateral trade pacts and mutual establishment of representative offices. The Straits Times, Singapore