Whenever there is a sign of possible weakness in China’s financial armour there are voices that cry out that a crisis is brewing. The latest example is the recent default on a bond payment by Shanghai’s Chaori Solar Energy Science and Technology. This quickly prompted questions about whether this was China’s “Bear Stearns or Lehman moment”. Less alarmist views welcomed the default as a signal that the government wanted to instil a sense of prudent risk-taking.
Interpretations of Premier Li Keqiang’s statement that future defaults may be unavoidable also depended on one’s sentiments, with some seeing it as a sign of imminent problems and others dismissing it as an acknowledgment that defaults are part of every economy.
All this, however, may be missing the point.