Hong Kong, China, and Canada economies are on the radar for being at most risk of a severe crisis in their banking industry. These reports are according to the analysis carried out by the Bank of International Settlements. Since the year 2011 Canada’s economy has tremendously grown at a very high pace. Maxed out credits cards and high debts on the broader economy propelled it to this victory. Among the risks that are primarily contributing to the high risks on Hong Kong and China’s economies, is household borrowing. Household borrowing is also a significant indicator of buildup risks to many other economies. According to studies conducted by international organizations, surprising results were witnessed. Italy wasn’t in the bracket of those countries that were at risk. Despite its significant struggles with a crawling economy and banks that were burdened with debts, Italy has survived and continued to be among the European economic giants.
On the other hand, according to BIS, China was flagged, but a slight improvement was witnessed fostered by the government to reduce the financial sector risk. A domestic difference gap showed that there was a significant difference between the GDP ratio and the country’s long-term trend. The increase in numbers evidently signals a rise in credit growth and that an excessive financial bust perhaps may be on the loom. The gap in China drastically fell from a lucrative peak of 28.9% in 2016 to 17.7 % in 2017.Studies indicated that this was the lowest percentage that was recorded. After drastic efforts were put in place by the Chinese government, a narrowing gap was witnessed which indicated that the efficiency in financial intermediation was significantly improving.
Ding Shuang, a chief economist, said that with that positive pace, it would significantly assist slow down the rate at which the rise of GDP debt was shooting. Clear, and deleveraging conditions were being created for a better economy. China has vowed to get serious about all the dangers that may affect their financial system. De-risking has been the government’s core business since the year 2015, and its powerful politicians are ramping out directives on anything that may attempt to shadow stock market speculation.
Financial regulators have cracked a primary target for curbing the increase in wealth management and all interbank borrowings and instead, concentrate the scope on household debt. According to this study financial analysts categorically assumed all household borrowings and all cross-border currency exchange as the potential bases of vulnerability against the earlier crises.