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The Bubble Kingdom
China’s Massive Debt Problem
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  • Dhako

    I see our Walter, is yet again in a wishful thinking mode about China. And, for good measure, just so that he will have a “believable alibi” for his wishful thinking, he is quoting a well known gloom-monger about China, particularly in one who comes in the form of a female’s equivalent of Gordon Chang, namely, the said Ms Charlene Chu in the above statement.

    Perhaps, our Walter should acquaint himself with the tendentious works of certain Ms Chu, particularly her silly assertions about China, in which she was putting it out in a number of years, which was when she was on record in saying the end of China’s economy is at hand. And, that was when she was in Wall Street (as an economic analyst about China), before she moved back in to Hong-Kong.

    Consequently, to say China is heading for the ash-heap of bust economy on the basis of the latest nonsensical guff from a certain Ms. Chu, is like believing the “alleged” American dream is at hand for the White-working Class denizens in the Rust-belt America, And, if they don’t believe that “assertion” then, presumably they are in thrall to their “lying eyes” instead of believing the Belt-way pundits (like Walter in here) who will tell them that the American Dream is alive and kicking for them, if only they try hard enough on a minimum wage.

    Similarly, according to Ms Chu, China, is heading for a bust. And, if you demure from that, on the basis of having the economical data to back up your assertion (which I can do it, easily if Walter wants) simply means, according to Walter and to Ms Chu, that, one is believing his “lying eyes” instead of swallowing the latest wishful thinking of the likes of Walter and Ms Chu.

    Hence, keep wishing the worse for China, Walter. For I will bet that the US will re-enter a recession long before the Chinese arrived at any slow down, much less about the “alleged” bust, in which you and the Ms Chu, are forever prophesying for China.

  • Pete

    “The huge credit surge was, in part, an attempt by Chinese authorities to keep the old economic model working and growth numbers from falling. ”

    Actually, the credit surge was an attempt by the Chinese to escape their Third World status and join the developed world.

    • Jim__L

      Yes, because to be a Developed World country, your government has to spend lots and lots and lots and lots of money it doesn’t have.

      That’s what Chinese officials learned when they went to school at Ivy League universities.

      Comedy, comedy, all is comedy.

  • Andrew Allison
    • Dhako

      You do know, I take it, that, for a nation to suffer a crisis of it’s currency in-terms of it’s spiral of depreciation, just like it happened in Mexico in 1994 and in Turkey in 2001, that country, must be one with a high foreign debt and low foreign exchange reserves. And, in the case of China’s situation is the reverse. Which means, Foreign debt is low and at $3.3 trillion the People’s Bank of China’s reserve stash provides a significant buffer.

      Moreover, although, China’s dept-to-GDP has reached a high proportion, but it is always the case, that, for this debt to be a destructive force, it has to be one in which is held by foreign entities, whereby, they can with a drop of the hat, either demand a higher interest rate for their “suffering” in holding on to your debts (in any length of time). Or failing that, they will liquidate your debts with all the repercussion such a move will have on your economy and on to your currency.

      However, as you may not know, in the case of China, the debt is mostly domestic, meaning its owed by different arms of the state family to another one in the same state economical outfit. That in turn gives China the scope to manage the problem in it’s own pragmatic way of servicing it, in a longer-horizon basis, rather than having this sort of debt blow up in it’s face, like those countries who borrowed tons of money from foreign sources.

      • Andrew Allison
        • Dhako

          We shall see who is dreaming, soon enough. And, by the way, the US’s position is in much more dire situation than that of China. And, in case, you wanted to know, just check in here:

          http://www.ft.com/cms/s/0/11f38928-ca6f-11e5-be0b-b7ece4e953a0.html#axzz3zE2zoDPC

          • Andrew Allison

            It’s all your fault. From the article: “Indeed, the imbalances within the Chinese economy, plus difficulties in many emerging economies, make this a risk now.”. Translated, the impending collapse of China will drag down the the developed world’s economies.

          • Dhako

            I think you are putting too much eggs on your pudding (as it were). In other words, the article doesn’t at all allude to impending collapse of China’s economy (as you tendentiously interpreted it). But, rather it says a great deal about the known difficulties the Chinese economy is going through, as it transition from one paradigm (mostly based on a investment and export) to another one, which will hopefully be base on a consumption of the Chinese’s continental size internal economy. And, this transition, is one in which the Chinese leadership has already acknowledged it.

            Furthermore, the article, clearly indicate the artificially-low-interest-rate, that has propped up western economies, in which even at that extreme low rate, the anemic economies of the western world hasn’t yet get out of the shadow of the 2008 financial crisis. Hence, its likely the the western economies (with their 2-3% growth rates) which are the likely candidate for the next recession long before China with her 6.5% growth rate is likely to enter any recession, much less a complete collapse. But we shall see, soon enough, I reckon.

          • Andrew Allison

            Whilst I love Chinese custard tarts, I find Chinese BS unpalatable. What the article says (correctly, I think) is that it is the Chinese collapse which will drive the developed countries into recession. In other words, the chicken will precede the egg. And if you actually believe the Chinese growth numbers, I have a bridge (not, as in China, to nowhere) to sell you.

      • Jacksonian_Libertarian

        $1+ Trillion in foreign currency has left China in the last year, and the bleeding has been accelerating. The Smart money has already left China, and the stupid money is now desperate to leave. So that $3.3 Trillion in foreign Treasuries, that took China 40 years to accumulate as it manipulated its own currency to provide its exporters with an unfair price advantage, will be gone in a year or so. This extremely quick reversal isn’t being calculated into the GDP growth rate, as a $1+ Trillion foreign currency loss from China’s supposed $18 Trillion (doubtful government number) GDP is a negative -5.55%. Also, Chinese imports have crashed by 20%-40% across the board, and electricity generation is falling as well, leading to the inescapable conclusion that the Chinese Government growth rate of 6.5% is a lie, and that the real number is hugely negative. No country has ever lost foreign investment at the rate China now is, so predicting what will happen is simple but not specific, it’s just going to be unbearably bad. I expect war and revolution as the Communists wave the bloody shirt in the South China Sea in an unsuccessful attempt to prevent themselves from being hung from the lampposts. Historically bloody revolution is common in China, and it looks like “interesting times” have come again. This is in reference to the Chinese curse “May you live in interesting times”.
        It should be recognized that this was America’s strategic plan from the beginning 40 years ago. Lure the Chinese into the capitalist American Global Trading System. Let them think they are cheating the Stupid Americans with their currency manipulations. While building a middle class in the hundreds of millions which had grown accustomed to rapid growth. This was all about giving the Communists enough rope to hang themselves with, while at the same time uplifting over 1 billion people out of abject poverty. We were Americanizing them, and all the while they thought they were ripping us off. Now the incompetence of the Communists and the 1/2 of their economy which the government owns, will be clear to all Chinese, and boy are they going to be pissed.

        • Jim__L

          The problem is, what they’re seeing is a natural business cycle — bad decisions need to be written down, and the economy has to (painfully) rearrange itself to do so.

          They may hang their *elites*… but they may blame capitalism.

  • Jim__L

    We need a bipartisan effort to export Unions and the TEA Party to China.

    Brace yourselves, we’re looking at a hard landing.

  • Anthony

    An Asian Pacific view: “facing economic headwinds, China predicts slower growth in 2016 – China set its floor for GDP growth in 2016 at 6.5 percent, but is determined to keep that pace for next four years.” thediplomat.com/2016/02/facing-economic-headwinds-china-predicts-slower-growth-in-2016/

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