More bad news on the commodity front from China. Reuters:
The debt ratio of major steel mills rose 1.6 percentage points to 70.1 percent from a year ago, taking the big mills’ debt to 3.27 trillion yuan ($499 billion), Li Xinchuang, the vice secretary general of the China Iron & Steel Association (CISA), told a conference.
At the same time, steel product consumption in China fell 5.4 percent to 664 million tonnes in 2015 from a year ago, the first drop since 1996, said Li, who is also head of the China Metallurgical Industry Planning and Research Institute.
Moody’s cut China’s credit rating from stable to negative last night, citing lack of faith in the government:
“Without credible and efficient reforms, China’s GDP growth would slow more markedly as a high debt burden dampens business investment and demographics turn increasingly unfavorable. Government debt would increase more sharply than we currently expect,” Moody’s said.
For the record, we have been concerned as well—both by the scale of the problems, and by recent signs of panicky reality-denial by those who sit in the catbird seat. When you also consider the surge in arrests and Party expulsions, and a renewed emphasis on propaganda, it’s hard to conclude that those who know best are anything other than pessimistic as well.