The complex web that has developed in China is characterised by opaque risk transfers, implicit guarantees and complex connections. To the extent that experience elsewhere in the world is any guide, it is difficult to escape the conclusion that this complex web in a highly indebted economy is a risky situation.
Nevertheless, the Eurosystem central banks have become the Member States’ biggest creditors – and that was the case even before the current crisis. For the part of sovereign debt that is on our books, funding costs are decoupled from the capital market. The interest on those bonds ﬂows to central banks, which distribute them back to their treasuries as part of their proﬁt.