Editorial: Deleveraging is the Correct Top Priority

The financial market has had both good news and bad news at the start of the New Year. In the last two weeks of 2016, the market was rocked by news that Sealand Securities, a midsize brokerage firm, will pull out of a “disputed” bond deal worth 10 billion yuan ($1.44 billion) that’s blamed on rogue traders. It fueled a mini-bond rout as jittery investors were concerned over an erosion of trust in the interbank market. But the market has calmed after the settlement of Sealand’s messy bond saga. Investors also cheered when lenders such as the Bank of China and China Construction Bank inked debt-to-equity swaps with lumbering state-owned giants, a positive step toward slashing the country’s massive corporate debt. These developments signal that authorities have set their eyes on reducing leverage in both financial and non-financial sectors.

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