China’s Minsky moment has arrived, a decade after the country chose to pursue policies that Minsky warned would make its financial system fragile and its economy unstable. What comes next for China nobody can say for sure. However, Minsky’s financial instability framework provides an insightful way to assess the risks.
Past is prologue when it comes to risk. A decade ago, the weaknesses in China’s economy and financial system were only possibilities, not foregone conclusions. However, as I wrote in 2015 and 2017, they were strong possibilities.
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