Corporate profitability must be improved to cope with rising financial risks by Zhang Bin and Zhu He: new.cf40.org.cn/uploads/202008… 1/5 #COVID19 #economicrecovery
China’s financial system will face two major potential risks in the near future:
1. corporate profit may not see continuous improvement, and bad debts of some enterprises in some regions and industries may increase sharply 2/5
1. corporate profit may not see continuous improvement, and bad debts of some enterprises in some regions and industries may increase sharply 2/5
2. bad loans of some of the financial institutions, especially small and medium-sized banks, could amass quickly, which may eventually lead to financial contagion. 3/5
To this end, monetary policy should remain proactive and accommodative. Monetary and fiscal policy coordination should be further strengthened to improve the efficiency of counter-cyclical adjustment. 4/5
Macro-prudential policy should maintain moderate flexibility to improve banks’ capability to serve the real economy, and financial regulation should be continuously enhanced to curb fund misappropriation. 5/5
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