No economy has achieved high income status with a closed financial system and many observers argue that if China is to stop mispricing and misallocating capital, it needs to expose its financial sector to real competition. But this involves real economic risk, and that means political risk. The government probably still has what it takes to bail out the financial sector in a property-related debt crisis. But its challenge in 2016 will be to stop debt accumulating and to tackle the underlying debt mountain. Financial risk again, political risk again. Read more
