Tightening of shadow banking is positive, says McGonegal
Capital Link International CEO Brett McGonegal explains how a sufficient level of credit is needed in the system for China to transform its economy.
Money is moving out of China’s Shadow Banking system and into the mainstream, says Capital Link International CEO Brett McGonegal.
“What’s really more important is we get an understanding of the tightening of the shadow banking and how they are deleveraging,” McGonegal explains. “Deleverage is a word that comes through the market; people get very scared. We’ve seen the market pull back on this. But in essence, I think this whole situation is very positive.”
The deleveraging process could take five to eight years, McGonegal says. “This is not something that happens overnight. Month-on-month numbers don’t really give much of an insight into it. However, what we are seeing is a bunch of the troubled assets – on the credit and on the loan side – are coming on balance sheet, which I think is very important for the market. So it’s not in the shadow banking system, per se anymore.”
McGonegal is also a principal shareholder in Asia Times.