While the Shanghai Composite has crashed in 2018, it is unlikely investors will witness a “Western style” financial crisis in China.

Why?

Don’t forget that despite its dalliances with capitalism, China is first and foremost a communist regime. As Hedgeye senior Macro analyst Darius Dale explains, the system is simply different in China. Risk must be viewed differently.

“China has a closed capital account exactly for this reason,” Dale explains in the clip above.

“Not only is most of their debt internally funded, but also three-quarters of all debt in China is on state-owned bank balance sheets. The politburo actually thought it was ludicrous for the U.S. government allow Lehman Brothers to fail in their framework.”

Watch the full clip above for more (including additional insight from Hedgeye CEO Keith McCullough).

Why China Likely Won't Experience a 'Western Style' Financial Crisis - early look