October 01, 2010

China Moves Towards Credit Default Swaps

Two significant reforms underway this week in China: Beijing approved expanding Shanghai's interbank market to a "National Interbank Loan Trading System" with 21 big banks signed up for interbank lending and word in Lujiazui is that real Credit Default Swaps are coming. And Reuters reports today that short-term commercial paper will be traded in the interbank market creating a new vehicle for short term financing and away from dependence on bank lending.

Bank lending has expanded enormously in China in answer to the Panic of '08. Today over 45 trillion Yuan or $6.8 trillion US dollars in bank lending are outstanding a number not far off that in the USA....

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