China’s decision to prevent a default by one of the country’s high-yield trust investment products may have spurred concerns about its commitment to reforming its shadow banking system, but some analysts believe the moment simply wasn’t right.
“In theory, these products should be allowed to fail to send a warning,” Erwin Sanft, a managing director at Standard Chartered, told CNBC. “That’s unlikely at the moment.”
He noted that China faces an economic slowdown and restrictions on public sector financing as well as the need to deregulate interest rates and put a deposit insurance system in place.
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