Davos 2018: China vows to save world from 2008-like economic crash to avert chain reaction
When the bubble bursts, China issued a blanket guarantee that no major institution would be allowed to fall.Fang Xinghai, the deputy chief of the China Regulatory Securities Commission and a key architect of policy, hit back at those he accused of trying to make money from a suspected crash.
He said the Chinese banking system would immediately avert a crisis by issuing a blanket guarantee for any failing institution.
Speaking at Davos, he said: “We have too much debt in our system.
“If something bad happens, we have learned from the US financial crisis, and we will move very swiftly to contain the risk so that panic caused by a small institution does not spread.
“The Chinese regulators will come in immediately so that interbank lending does not seize up and so that the system can function. Those who are ‘shorting’ China and betting on a financial collapse, thinking they can make money, will be wrong again.”
Mr Xinghai went on to liken the escalating situation with the 2007-08 US financial crash - but one China would avoid.
But raising fears a US-China trade war could erupt he said he would confront regulators or the US Federal Reserve if they take any steps to stop the boom.
He said: “It unavoidably has an impact.”
US President Donald Trump has long promised to clamp down on China and other exporters he argues compete unfairly with American manufacturers.
On Monday, the US government imposed stiff tariffs on solar panels and washing machines.
And President Trump last week threatened to issue China with big fine over alleged intellectual property theft.
Beijing has made repeated pledges to reform and open up its economy and when Xi Jinping won a second term during 19th Party Congress, he spoke of proposals to give the market more sway in the economy.
Professor of Economics at Harvard University, Kenneth Rogoff said concerns were growing for China, which is showing signs of a dramatic financial collapse as it finds itself in global debt records of $233 trillion (£172 trillion).
The fresh warnings come after the International Monetary Fund last December raised concerns China risks sparking a fresh global financial crisis.
The IMF’s health check sent a warning around the world over the growing debt-dependency of the world’s second-biggest economy.