Morgan Stanley’s Qing Wang created a new tracking concept, the China Macro Risk Radar (CMRR). The goal is to provide a framework to asses and monitor risk events of low to moderate probability (high probability events already have their own standing at the firm and are singled out in client calls) and high impact.
As part of its inaugural edition, MS has assigned 10 risk events to four different categories on the CMRR – each risk event is assessed according to six aspects, including its description, content, potential impact, likelihood, timeframe, and evolving direction. The top 10 event that shld concern investors can be summarized along the following four verticals:
Risk Category A: Macroeconomic
Risk Event 1: Massive NPLs
Risk Event 2: Local Governments Default
Risk Event 3: Economic Hard Landing
Risk Category B: Policy and Regulatory Changes
Risk Event 4: Rapid Wage Increase
Risk Event 5: Introduction of Property Tax
Risk Event 6: Resource Tax Reform
Risk Category C: Financial Market Shocks
Risk Event 7: Property Bubble Burst
Risk Event 8: Commodity Prices Spike
Risk Category D: External Shocks
Risk Event 9: European Sovereign Debt Crisis Redux
Risk Event 10: Trade Protectionism
Thoughts of a Cynical Investor 