China's Subprime Crisis Is Here
bloomberg.com
China's Subprime Crisis Is Here
1–10 of 219 posts
Re: China's Subprime Crisis Is Here
#2This doesn't seem like a particularly compelling argument. Bad loan volumes have risen, but not above historical highs.
As a percentage of total debt, the article says bad debt is at 1.67%. This is up 51% from 1.25% in the last year. Considering the amount of margin that's been wiped out as a result of the stock bubble popping, this doesn't seem terrible. In addition, it doesn't seem like this rate is accelerating (since 2009), but linearly increasing.
Maybe Chinese banks are consistently increasing the amount of debt they issue and the risk they take per unit debt as a rational response to increasing productivity of Chinese businesses. This implies a greater amount of leverage for the Chinese economy, but not necessarily extreme irrationality.
Maybe there's something here (I actually think there are structural problems in the Chinese economy) but this article does not make a compelling case.
Re: China's Subprime Crisis Is Here
#3China's situation is a bit different to the US's in that given it's socialist leanings it will probably just keep lending and bailing out.
Re: China's Subprime Crisis Is Here
#4This doesn't seem like a particularly compelling argument. Bad loan volumes have risen, but not above historical highs. As a percentage of total debt, the article says bad debt is at 1.67%. This is up 51% from 1.25% in the last year. Considering the amount of margin that's been wiped out as a result of the stock bubble popping, this doesn't seem terrible. In addition, it doesn't seem like this rate is accelerating (s…
Isn't the bigger issues China's structural draconian limits to freer movement of capital, external investment, the imaginary/real value of ghost cities and scale of holding illiquid foreign debt?
Re: China's Subprime Crisis Is Here
#5Assuming this headline is correct, what effects would that have on the global economy?
Re: China's Subprime Crisis Is Here
#6China's situation is a bit different to the US's in that given it's socialist leanings it will probably just keep lending and bailing out.
How is that different from the US situation? Isn't that exactly the US situation?
Re: China's Subprime Crisis Is Here
#7This doesn't seem like a particularly compelling argument. Bad loan volumes have risen, but not above historical highs. As a percentage of total debt, the article says bad debt is at 1.67%. This is up 51% from 1.25% in the last year. Considering the amount of margin that's been wiped out as a result of the stock bubble popping, this doesn't seem terrible. In addition, it doesn't seem like this rate is accelerating (s…
Isn't the bigger issues China's structural draconian limits to freer movement of capital, external investment, the imaginary/real value of ghost cities and scale of holding illiquid foreign debt?
One by one:
1. Freer movement of capital. This is a false herring in my opinion. Virtually no countries outside the US/EU offer completely free movement of money. The thing that matters is whether this prevents foreign capital investment (because people are scared of not being able to get their money back). In China, I don't think it does based on the last few decades of foreign investment.
2. External investment. As above, I don't think people are discouraged by the rules. Yes, you have to make a 50% joint venture, bribe government officials, share technology, have no copyright/IP protection, and risk your partner entering the market as a competitor once they learn your business (see Asus). But, you can still make so much money that it's probably worth it (or so American corporations seem to believe).
3. Ghost cities. I don't know much about this one honestly. I've been hearing about this since 2009, but consider that China is increasing their urbanization rate by 1 percentage point per year (~10M people/yr). If I were asked to manage that as a central planner, having excess inventory of housing would be critical to prevent slowdowns and allowing for some burstiness. Yeah, there's probably ghost cities, but how long do they remain before becoming occupied. Are the same cities hanging around forever (and people complaining about them forever), or is it new stock every year?
4. Illiquid foreign debt. Most of China's debt is in two categories: 1) Popular debt (US/EU) or 2) strategically important countries. For (1), there's likely some market. You're right that they can't sell too much, but they've already notified the world that they will begin selling their holdings over the next decade and since central banks in the western world are trying to increase the reserve interest rate there should be people willing to buy this stuff (or the government can buy it and reissue at a higher interest rate to make people want it). For (2), don't think of it as debt, but operating expense, never to be recovered.
Re: China's Subprime Crisis Is Here
#8China's situation is a bit different to the US's in that given it's socialist leanings it will probably just keep lending and bailing out.
Good point...
I would have to believe that within China there are many brilliant economists who knew that their "expansion" could not continue forever...
Further, I think government officials were informed of the same...
We have a vague idea of their "reserves"...that vagueness is a bit troubling...
Re: China's Subprime Crisis Is Here
#9Ahhh the old' China crisis again! The dog that didn't bark. The Charlie Brown football that never got kicked. The constant and unending crisis that is on its way any day now.
As I have explained over the years in many previous comments, China's banking system is partially privatized central planning, the government prints it's own money. Thus, when there is a credit crisis the government just recapitalizes the banks with freshly printed Yuan and sells off the bad loans at a discount. Bankers who behaved badly get executed or disappeared and the whole thing starts over.
Don't believe me? Let's take a trip down memory lane on HN:
China: Crisis Gauge Rises to Record High 2 points Cless 2 years ago 0 comments (http://www.bloomberg.com/news/2014-02-26/crisis-gauge-rises-...)
China Interbank Rates at Record High (think Lehman Bros.) 1 points teawithcarl 3 years ago 0 comments (http://m.theepochtimes.com/n3/118747-china-banking-crisis-in...)
China's Brewing Crisis Is a Thousand Times Greece's 8 points ytNumbers 6 months ago 4 comments (http://www.forbes.com/sites/panosmourdoukoutas/2015/08/25/ch...)
Skyscraper index points to elevated risk of financial crisis in China, India 2 points cs702 4 years ago 0 comments (http://www.scribd.com/doc/78470886/Index-Bubble-Building-100...)
China fears bond crisis as it slams quantitative easing 1 points chaostheory 7 years ago 0 comments (http://www.telegraph.co.uk/finance/newsbysector/banksandfina...)
China hit hardest by US Downgrade 2 points ca136 5 years ago 0 comments (http://gulfnews.com/opinions/editorials/us-crisis-hits-china...)
China’s Coming Economic Crisis? 3 points kercker 2 years ago 0 comments (http://www.nytimes.com/roomfordebate/2014/04/08/chinas-comin...)
Why China Will Have an Economic Crisis 1 points eande 4 years ago 0 comments (http://business.time.com/2012/02/27/why-china-will-have-an-e...)
Confidence of China VCs drops to new low 2 points ilamont 7 years ago 0 comments (http://www.thestandard.com/news/2008/10/29/global-economic-c...)
Re: China's Subprime Crisis Is Here
#10I think mr. Madoff need to be let out of jail to educate Chinese government.