Why China’s latest ‘financial innovation’ might not work

Business & Technology

Although credit-default swaps "provide lenders with a tool to hedge their credit exposures by purchasing CDS protection, it is unclear who will be the seller of the protection, and if the sellers are other financial institutions, the credit risks are merely transferred to other parts of the financial sector," notes Goldman Sachs analyst Kenneth Ho.

Credit: BEIJING, CHINA - JANUARY 04: People walk in the smog on January 4, 2017 in Beijing, China. The Central Meteorological Observatory issued a orange alert of smog in Beijing, Hebei, Henan, Shanxi, Shaanxi and some other regions in China on Thursday morning. (Photo by Hao Yi/Beijing Youth Daily/VCG via Getty Images)