At a secret meeting of top Communist officials at the start of this decade, Zhu Rongji, then China’s premier, summoned senior academics and finance officials to teach a crash course on complex financial instruments.
Financial derivatives, in the best explanation provided that day, were described as like putting a mirror in front of another mirror, allowing a physical object to be reflected into infinity.
China’s leaders, most of whom are engineers by training, decided to take a cautious approach towards these exotic products and still have yet to allow most kinds of derivatives.
So as the global financial system teetered on the brink of collapse last week, Chinese officials and bankers “seemed as if they were observing events on another planet”, said a senior western banker who was in Beijing for meetings.
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