Financial assistance for individual countries must be tied to strict economic and fiscal policy conditions; assistance must be made subject to appropriate interest rate premiums; and private creditors must be involved should the country in question default. Above all, a crisis mechanism must not be used to brush aside important principles under the smokescreen of safeguarding financial stability.
Deutsche Bank argues that while China’s credit/GDP ratio is rising, the inherent advantages of a current account surplus, high net foreign assets (13 per cent of GDP) and low external debt burden (about 10 Per cent of GDP) offer a significant counterweight to the risks of a crisis posed by a high credit/GDP ratio.