Warning Signs in China's Financial System

• From rural bank runs to surging consumer indebtedness and an unprecedented bond restructuring, mounting signs of financial stress in China are putting the nation’s policymakers to the test.
• Xi Jinping’s government faces an increasingly difficult balancing act as it tries to support the world’s second-largest economy without encouraging moral hazard and reckless spending.
• While authorities have so far been reluctant to rescue troubled borrowers and ramp up stimulus, the costs of maintaining that stance are rising as defaults increase and China’s slowdown deepens. 
• For now, investors appear to be betting that policymakers can manage the country’s financial risks and keep the economy afloat.

(Source: Bloomberg)