During a boom, highly leveraged investment Banks encourage a credit bubble, whereas in a credit bust they have to deleverage faster.
Now no leveraged investment firm appears to be any stronger than the weakest link in its debt structure.
But China's financial system is not without problems. It is only because the Chinese Banks did not have the highly leveraged investment-related risks.
For instance, highly leveraged investment Banks lend more when credit is easy and pull back faster in the crash.
