Crashed: How a Decade of Financial Crises Changed the World

by Adam Tooze

All told, 25 percent of China’s corporate debts were in dollars, but only 8 percent of its corporate earnings. This mismatch was profitable but risky. If any one of the underlying conditions changed—interest rates, exchange rates or commodity prices—then the position could become loss making. In 2015 all three conditions changed. The Fed’s retreat from QE promised that the interest margin would soon be shifting the wrong way. The slowdown in China’s own growth and the sudden collapse in oil prices in 2014 reversed the momentum of commodity prices. Xi’s drive against corruption in China caused wealthy families to move assets out of the country. The outflow exerted downward pressure on the yuan. For those holding some part of the $1.1 billion in foreign exposure, this combination of factors was very bad news, and due to the fact that this was common knowledge it risked a stampede.