China's regulatory reforms bring it closer to global best practices

OVER the past months, China has raised eyebrows and caused consternation with its multi-pronged crackdown on sectors ranging from tech and property giants to gaming and private tutoring.

Criticism has been loud, but any fair assessment of the regulatory reforms must consider the remedial changes being made. In fact, one can argue that some of these reforms bring China more in line with global best practices.

Take the examples of Evergrande - one of China's largest property developers and the country's biggest junk bond issuer - and Huarong, China's biggest investor in bad bank assets. Regulators have unwound some of their off-balance sheet chicanery and curtailed loans to other financial firms. Such debt - which had soared to 78 per cent of China's gross domestic product (GDP) by end-2016 - raised concerns about credit defaults in the highly-leveraged property sector and wider contagion. Today, the loans are down to about 54 per cent of China's GDP.