Stuart Gulliver, chief executive of HSBC, downplayed the threat posed by China’s shadow banking sector, saying any possible default “would have the benefit of imposing discipline.”
“It is inevitable that there will be pain for borrowers in the shadow banking sector but it will be manageable,” he added. “China’s banks also have the resilience to withstand the impact and the central bank has enough flexibility to provide liquidity support.”
Mr Gulliver’s remarks underscore the growing recognition that some defaults are inevitable as China seeks to slow the runaway growth in credit, especially in sensitive areas such as real estate.
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