China’s central bank warns of a sudden collapse in asset prices

China will fend off risks from excessive optimism that could lead to a “Minsky Moment,” central bank governor Zhou Xiaochuan stated Thursday, adding that corporate debt levels are relatively high and household debt is growing too quickly.

A Minsky Moment is a sudden collapse of asset prices after a long period of growth, sparked by debt or currency pressures.

The theory is named after economist Hyman Minsky.

China will control risks from sudden adjustments to asset bubbles and will seriously deal with disguised debt of local government financing vehicles, Zhou said.

The People’s Bank of China governor was speaking on the sidelines of China’s 19th Communist Party congress.

Source: Reuters