Beijing is authorising the establishment of a second batch of so-called bad banks, this time at the provincial level, as it continues its slow move towards more financial deregulation.
This time around the incentive is to prepare for any nasty side-effects as interest rate controls are gradually relaxed. Those include a rise in the cost of capital for already cash-strapped Chinese companies as well as the possible risk of accidents in Chinese banks that have not had to worry about asset liability management in the past.
The purpose is also to deal with a new round of bad debts following the stimulus programme adopted in the wake of the global financial crisis.
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