Oct 20, 2017 06:29 PM

China Must Guard Against ‘Minsky Moment,’ PBOC’s Zhou Says

Zhou Xiaochuan said that if
Zhou Xiaochuan said that if "there is too much optimism during a period of prosperity, tensions will build up which could at some point lead to a sharp correction." Photo: Visual China

People’s Bank of China (PBOC) Governor Zhou Xiaochuan said the Chinese authorities must focus on preventing a crash in asset prices that could trigger a financial crisis, reiterating a commitment made by President Xi Jinping this week to guard against financial risks that could derail the economy.

Zhou warned that excessive optimism during a period of strong economic growth and asset appreciation could lead to what’s become known as a Minsky Moment, when asset values collapse suddenly as a result of an unsustainable build-up of debt and speculation fueled by credit.

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