Chinese “shadow banking” and an investor’s long-term plan

April 23, 2013

We believe the reaction has been exaggerated and is a good opportunity to remember that
investing based on news alone can be very ineffective. 
-Paul Christopher, chief international strategist, Wells Fargo Advisors
-Sameer Samana, international strategist, Wells Fargo Advisors


The events of the past several years left many investors more sensitive than usual to new risks and on the lookout for a replay of recent turbulence. Consequently, many investors have turned excessively defensive, meaning that they have abandoned or suspended long-term planning to focus instead on the news of the day. One of the most recent disappointments was the Chinese government’s decision to rein in certain types of lending by banks and non-bank financial institutions, so-called “shadow banking.” The term reminds U.S. investors of the sub-prime crisis of 2007 and 2008, even though the similarities are limited.

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