Have investors misunderstood China credit crunch risk?

Growing fears over the risk of a credit crunch in China are misplaced, according to EFG Asset Management's Mansfield Mok, with the government standing behind the banking sector and ready to boost liquidity if needed.

The manager of the New Capital China Equity fund said investors are wrong to believe that China is experiencing a sudden liquidity shortage as a result of the spike in the SHIBOR rate, which some said put it in danger of experiencing a credit crunch. "Interbank lending in China only accounts for a tiny portion of China's real economy," Mok (pictured) said. "Most corporate borrowing rates are still based on the People's Bank of China lending rate (now at 6%), not SHIBOR." He said liquidity is "the last thing Chinese economists are worried about", as the country has the largest foreign ...