Has China’s Minsky Moment Arrived?

By MAMTA BADKAR at Business Insider

[Picture credit: Reuters]

After years of booming credit expansion, we're now seeing slower economic growth in China and a rising number of domestic bond defaults.

This has prompted many to ask has China's 'Minsky moment' arrived?

The phenomenon is named after economist Hyman Minsky who articulated that periods of speculation and credit growth inflate assets, only to end in crisis.

Societe Generale's Wei Yao was one of the first to write this up a year ago.

Morgan Stanley's Cyril Moulle-Berteaux and Sergei Parmenov, argue that China is approaching its 'Minsky moment' (via Zerohedge). 

"In recent weeks, a trip to the region and further research into China’s shadow banking system have convinced us that China is approaching its “Minsky Moment,” (Display 1) which increases the chances of a disorderly unwind of China’s excesses. The efficiency with which credit generates economic activity is already deteriorating, as more investments are made in non-productive projects and more debt is being used to repay old debts."

[Chart: Morgan Stanley via Zerohedge]

But UBS economist Tao Wang argues that China's 'Minsky moment' isn't here. Wang points to a few reasons she thinks China pessimists are wrong.