- April 2014 Vol.6 No.4

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Red threat: It remains unclear how Chinese banks will handle deleveraging and lending risk

by Benjamin Cole

The econo-blogosphere in late February erupted when Nobel Prize–winning Paul Krugman of The New York Times posted that “Chinese … gauges of financial stress … have widened sharply.” The world’s most-read econo-blogger added that he was “scared” of the “Red TED spread,” a measure of the relative riskiness of inter-bank lending. Krugman’s blurb ricocheted across the i-commentariat immediately, jangling investor nerves and unplugging another flood of China conjecturing.

Almost simultaneously to the Krugman post, CCTV — China’s own news station — reported that the long-sinking Shanghai Stock Exchange Composite Index “plunged on … fears of a property bubble burst and the continued depreciation of the Chinese yuan.” And a blogger from The Wall Street Journaladded to the cacophony with a post titled,

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