In Brief

Davos: China promises bank rescue to avert financial crisis

Lessons learned from Lehman collapse prompt ‘blanket guarantee no major institution will be allowed to fail’

China’s financial regulator has vowed to step in and save the Chinese banking system if and when the bubble bursts to avert a full-blown financial crisis.

Speaking at the World Economic Forum in Davos, Fang Xinghai, deputy chief of the China Regulatory Securities Commission and a key architect of policy, said he had studied the errors that led to the Lehman crisis of 2008 and would not allow such a chain reaction to happen again.

“We have too much debt in our system,” Fang said. “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.”

This amounts to “a blanket guarantee that no major institution will be allowed to fail”, says Ambrose Evans-Pritchard in The Daily Telegraph, even if this means paying a price in terms of lost economic growth and dynamism.

Fang also hit out at the US, accusing President Donald Trump of boasting about each new record on Wall Street while continuing to denounce regulators, suggesting this could lead to another bubble, with huge implications for the global economy.

This is the latest round of a war of words between China and the US after Trump decided to impose 30% tariffs on US imports of solar panels and washing machines.

The new measures, denounced by Beijing as “an abuse” which will “aggravate the global trade environment”, are Trump’s first significant trade actions of 2018 and a demonstration of his “America First” agenda.

CNN Money says “trade issues are set to put a heavy strain on relations between the world’s two largest economies this year”. With Trump expected to make big decisions on possible tariffs in other areas in the coming months, Beijing urged his administration to tread carefully.

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