Michael Pettis

Big Losses Are Hidden on China's Bank Balance Sheets

Patrick, there is also the problem that the PBoC cannot transfer reserves to the AMCs without increasing their own net borrowings -- after all the reserves are not capital, they are assets funded by RMB borrowings by the PBoC. Convering the AMC losses out of reserves would require an increase in Beijing's net debt just as surely as paying the bonds off directly.