Surprise! China Denies Debt Crisis
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  • Andrew Allison

    “Considering yesterday’s People’s Daily editorial, that resistance doesn’t appear to be weakening.” For which we should be duly grateful. With a little bit of luck the Chinese government’s refusal to fact facts may cause its economy to implode before ours does for exactly the same reason.

  • lukelea

    My understanding of the Chinese debt situation is like this: the43 is no old-age assistance in China and under the one-child policy parents cannot expect to be cared for by their children. Therefore they save half of their earnings for when they retire. But because the banking system in China is owned by the state, the only place to put their savings is in the state-owned banks, which pay an artificially low rate of interest (sort of like US Savings Bonds during WWII or 3% interest savings accounts in the old Savings and Loan banks). These banks then turn around and lend these workers’ life savings to projects, also at artificially low rates of interest, which have no chance of ever paying off: freeways, sky scrapers, etc.

    This means the money won’t be there when this generation of Chinese workers reach retirement age. For now however any worker who wants to withdraw his savings is able to, even if the bank doesn’t have the cash on hand. How so? The Party has given banks the right to print money right on the premises, or something equivalent, or so I have read. You can imagine how this is going to end. The only mystery is when?

    • f1b0nacc1

      Actually, it is a little different than that…
      As the banks are (for the most part) corrupt and unreliable (there is no real recourse, for instance, if a politically connect – and they are ALL connected – bank simply disappears with your life savings), many Chinese choose to invest in property. You cannot own land, so housing (the newer the better) is a very popular choice….

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