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At present, systemic risks are under control, but China

Concerns about the financial stability risks posed by the growth of shadow banking have prompted the Chinese authorities to impose stricter regulation of shadow banking activities, both by banks and nonbank financial entities. Off-balance sheet activities by the commercial banks could affect their risk profiles. While trust companies and other nonbank financial entities not backed by the government, their liabilities pose broader risks as the failure of any such institution could undermine confidence in the

Two corollaries then followed. One was to enhance the profitability of financial corporations relative to industrial capital and to find new ways to globalize and supposedly absorb risks through the creation of fictitious capital markets (the leveraging ratio of banks in the US rose from around three to thirty). Non-financial corporations (such as auto companies) often made more money from financial manipulations than from making things. The other impact was heightened reliance on “accumulation by disposs

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In addition, foreign corporations in China face reputational risks in their home countries. Just as Google, Microsoft, and Yahoo have been sharply criticized in the United States for allowing (in some cases, helping) the Chinese government to manipulate consumer use of the Internet, other firms may find themselves accused of contributing to unfair labor practices or unsafe environmental conditions.

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