Recently, heavyweight Wall Street bankers have once again issued warnings about the increasing global financial and geopolitical risks. At the same time, foreign media analysis suggests that the United States’ relative advantages in energy and finance continue to expand, while in the world’s second-largest economy – China, controversies related to debt restructuring and financial risks have surfaced.
Long-term China economy and financial risk observer, Taiwanese think tank scholar Wang Guochen, appeared on the New Tang Dynasty TV program “News Breakthrough” to share insights on these recent developments.
Jamie Dimon, Chairman and CEO of JPMorgan Chase, stated in the 2025 annual report to shareholders on April 6 that the current global landscape faces multiple challenges such as the Ukraine war, Iran conflict, Middle East tensions, terrorism, and escalating tensions with communist China. This statement is seen as Wall Street’s renewed warning about global political and financial risks.
Wang Guochen, Deputy Researcher at the Taiwan Institute of Chung-Hua Economic Research, believes that from the perspectives of financial structure and geopolitical evolution, China’s influence remains a significant variable.
He points out that Wall Street’s changing attitude towards the Chinese market in recent years is not coincidental. While the Chinese government had introduced the Foreign Investment Law, promising to open up the financial industry, foreign investors found a lack of sales channels and customer bases once they entered, leading many Wall Street institutions to retreat following the pandemic. Additionally, the Chinese government’s enactment of the Anti-espionage Law has heightened foreign investors’ concerns with opaque data and questioned financial transparency, creating high levels of uncertainty even for investments in China from abroad.
Given this backdrop, there has been a reevaluation of the United States’ position in the global energy and financial landscape.
An article by the Wall Street Journal on April 4 highlighted that the Iran conflict has further established the United States’ dominance in the global economy unlike ever before. As a major energy exporter, the U.S.’s influence has amplified amidst global energy supply tensions.
At the end of March, JPMorgan Chase launched the “American Dream Plan” to expand support for domestic economic opportunities by aiming to increase services for small businesses from 7 million to 10 million, investing in areas like small enterprises, housing, employment, healthcare, and local development. Wang Guochen sees this as reflecting a global capital realignment.
He believes that as funds gradually flow out of the Chinese market, investment opportunities in the U.S. become more apparent. Financial capital flowing back to the U.S. is not only due to risk considerations but also due to optimism about the future value of the U.S. and its democratic supply chain.
However, Wang Guochen also points out that the expanding U.S. relative advantage does not mean that its own issues have disappeared, with one of the biggest concerns being debt.
He notes that an increasing proportion of the money the U.S. currently prints is being used to pay back existing debts, leading to an unsustainable debt structure that continues to grow rapidly.
According to him, the key issue lies not only in trade imbalances but also in the cycle where China accumulates U.S. dollars from trade surpluses and then buys U.S. debt, which is now loosening.
Wang Guochen highlights that China’s long-standing large trade surplus with the U.S., combined with its past purchases of U.S. debt, has created an imbalance where China heavily sells goods to the U.S., without proportionally investing in U.S. debt as before. This has destabilized the original fund circulation. Coupled with high U.S. interest rates and fiscal deficit pressures, U.S. bond yields continue to rise, further increasing U.S. debt costs.
In Wang Guochen’s view, without addressing the China factor, the pressure on the U.S. financial system might be challenging to alleviate fundamentally.
On the other hand, pressures within China’s own financial system are rapidly emerging.
Recently, citing media reports, the self-media channel “Xiao Cui Politics and Finance” on April 2 reported that the latest financial reports from the two largest assets management companies in China – China Cinda and China Huarong, have once again raised doubts about financial risks. These Asset Management Companies (AMCs) were established in China in the late 1990s specifically to handle bad assets of banks.
Wang Guochen points out that the original purpose of the four major AMCs in China was to deal with bad debts of state-owned banks. However, as the real estate risks have escalated, even the AMCs themselves are under pressure due to absorbing too many toxic assets. From the early 2000s when the four major banks divested bad debts, to issues arising with the four major AMCs around 2020, and now with related institutions being questioned for financial beautification, Wang Guochen believes this indicates that the accumulation pace of China’s non-performing assets is accelerating significantly.
He argues that the root cause of non-performing assets primarily lies in real estate. The profits of the four major state-owned banks in the past were highly related to real estate, and even the AMCs relied on real estate profits to offset bad debts. When real estate itself turns into non-performing assets, the overall risks escalate rapidly.
Another source of risk in China comes from local government financing platforms issuing local government bonds, known as Local Government Financing Vehicles (LGFVs). Previously seen as having implicit government support, LGFVs are now facing challenges with declining real estate and deteriorating local finances in meeting debt repayment obligations.
Using Guizhou as an example, Wang Guochen highlights the 2020 Zunyi LGFV debt restructuring event as a significant case.
During that time, a local government financing vehicle in Zunyi, Guizhou did not repay its debt as originally agreed but instead, extended the deadline and lowered the interest rate – seen as a “de facto default” by the market, breaking the expectation of LGFVs having implicit government guarantees. The resolution was not to penalize the local government but for the central government to coordinate state-owned banks to delay repayment deadlines and lower interest rates, essentially postponing the risk further down the road.
In Wang Guochen’s view, this episode reflects the fundamental issue of local governments being financially constrained. Importantly, the Zunyi event also mirrors the common approach to handling local government debts in China in recent years – the so-called “debt restructuring.” This process often involves shifting the debt from the financing platforms to local governments, then onto banks, absorbed by AMCs, and ultimately managed within the financial or policy bank system. He sees this process as continuously shifting and deferring risks among local governments, banks, AMCs, the fiscal system, and the central bank.
Wang Guochen states that the Chinese Communist Party currently has roughly two approaches to this predicament: requiring state-owned enterprises to contribute more profits or providing funding support through policy banks and the People’s Bank of China (the central bank of the Chinese Communist Party). This entwines China’s fiscal, banking, state-owned enterprises, and central bank into a complex mix, ultimately relying on printing money for support.
Regarding the possibility of Chinese financial risks spilling over, Wang Guochen believes that a major focus in the future will be the financial showdown between the U.S. and China, including issues like the Renminbi payment system and whether the U.S. will establish clearer financial firewalls.
If China’s internal accounts remain chaotic and opaque risks are transmitted abroad via overseas investments, the internal bad debt and false accounting risks could create unpredictable time bombs for other countries.
In conclusion, Wang Guochen emphasizes that from the U.S.-Iran conflict to the current U.S.-China competition, the next wave of significant attention will be the financial system itself, particularly the outward spill of Chinese financial risks.