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Economy

China's debt downgrade signals alarm over its finances

Growing reliance on shadow finance raises fears of a 'Minsky moment'

"The Bund Bull" is ensconced in Shanghai's traditional financial district, the Bund. (Photo by Kenji Kawase)

HONG KONG China's financial vulnerabilities are fueling the belief that China might have a "Minsky moment," in which debt levels hit the breaking point and asset values collapse. Among the dangers, local lenders being squeezed by tighter interbank credit, relentless growth of shadow assets and cross-holdings between banks and nonbank financial institutions.

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