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China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

nytimes.com

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Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#121

Post by HillaryBriss »

matheweis wrote: post #43

Ok, this is probably a silly question, but who holds all the debt now? The avg US citizen would say China holds much of the US debt, but now it sounds like China is borrowing their way into trouble too... it's not any of these third world countries... who is it?

This is from the NYTimes article itself: ... the biggest category of debt in China is corporate debt, which equals almost 170 percent of annual economic output. This debt consists overwhelmingly of loans by state-owned banks to state-owned enterprises.

So ... does that answer the question? I'm not sure. I'm used to thinking about how much money the US government owes to outsiders.

But, this "state owned enterprise" and "state owned bank" thing -- how do you make sense of that? The government, which also controls and creates the currency, has loaned its own enterprises a bunch of money. So what if they default? Does it matter?

How do you even think about that?

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#122

Post by mistermann »

dis-sys wrote: post #63

Moody's? Is that the same credit rating agency which intentionally inflated credit rating for risky mortgage investment and eventually fined almost $1b[1]? It is just so funny that an agency that has already destroyed its own creditability is still running around and doing credit rating for others. [1] http://www.abc.net.au/news/2017-01-14/moodys-agrees-settleme...

Surprised this sentiment isn't more popular, they've proven themselves to be both dishonest and incompetent.

This could also be state propoganda, the modern US being what it is.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#123

Post by fspeech »

JumpCrisscross wrote: post #19
Apes wrote: post #14

Earlier quoted context omitted.

Where did you get this info? Every source I see shows China's Debt/GDP (42.90%) as much lower than the US (104.17%).

China's total debt is about 250% of GDP, compared to over 300% for the United States [1]. It's more useful to observe total debt since lots of debt the Chinese government will ultimately have to assume, in one form ( e.g. financially) or another ( e.g. political turmoil), is not held on the government balance sheet, e.g. debt issued by its banks or critical employers or regional governments. Most American debt, on th…

The 43% number already includes provincial government debt. Direct debt of the central government is about 20%. https://en.m.wikipedia.org/wiki/List_of_countries_by_public_...

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#124

Post by alphonsegaston »

zeamaize wrote: post #70
vijucat wrote: post #68

The day after the Fukushima nuclear incident, the top-voted article on HN was an extremely confident-sounding article by an expert about how this was a minor incident, sure to be contained and forgotten. The comments in the article were dismissive about alarm. I remember feeling a sigh of relief that the experts had pronounced it a minor incident. As the days rolled by, the news about Fukushima turned from bad to wor…

But Fukushima was a minor incident...

Thousands of families have forced out of their homes and displaced by a radiation-polluted landscape, which the conservative government is trying to pass off as safe so they can pull their disaster relief subsidies:

https://www.theguardian.com/world/2017/mar/10/japan-fukushim...

https://www.theguardian.com/world/2014/sep/10/fukushima-nucl...

I pray that nothing similar happens to you or that you have to suffer the indignity of people glibly dismissing your misfortune.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#125

Post by mistermann »

state_less wrote: post #75
wu-ikkyu wrote: post #61

Earlier quoted context omitted.

>The avg US citizen would say China holds much of the US debt, but now it sounds like China is borrowing their way into trouble too... it's not any of these third world countries... who is it? The central banks, obviously. Many of them not being beholden to a nation but to private individuals.

At the end of the day though, even private individuals are beholden to the people in the nation. It's a social contract, so people may no longer agree to allow those private individuals to be wealthy and run the banks. That said, if you're holding the wealth, it's not too hard to keep the shop running (people happy) so long as you don't get bored, reckless and feckless.

Luckily, they also control the government and military.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#126

Post by HillaryBriss »

state_less wrote: post #50
matheweis wrote: post #43

Ok, this is probably a silly question, but who holds all the debt now? The avg US citizen would say China holds much of the US debt, but now it sounds like China is borrowing their way into trouble too... it's not any of these third world countries... who is it?

US government borrows money from the Fed. People (China) also buy Treasury bonds, but I think this is much smaller than the debt we owe ourselves. Someone else can chime in with more depth, but basically the US government has been good about not borrowing too much from itself. I just hope we can stay rational as a country and this continues.

but, strictly speaking, the Fed isn't the same as the federal government.

also, the US government has borrowed a whole hell of a lot of money from outside sources (e.g. corporations, US investors, and foreign governments from Japan to China to Saudi Arabia to European nations)

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#127

Post by usefulcat »

ars wrote: post #87
zeusk wrote: post #69

Earlier quoted context omitted.

> There was a stock broker looking for new business. He cold called 512 people (he must have been a quant); half he told to sell X stock, half he told to buy. The next week he called the 256 for whom he'd made the right prediction and did the same again: Half he told to sell, half to buy ... several weeks later he was down to 16 people. He called all of them and said, 'look, I was right 5 times in a row ...'. Except,…

It sounds more like a parable, not an actual story. The point is that if enough people make prediction, some of them will right over and over and over - even though it's all random.

Or if one person makes enough predictions..

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#128

Post by b88d80170 »

drcode wrote: post #31
ryandamm wrote: post #15

I think the best model to understand this is Michael Pettis's balance sheet analysis. He covers it extensively, but here's his latest digest of the model: http://carnegieendowment.org/chinafinancialmarkets/66221 It really makes clear how stark the choices are for China. The debt binge of the last ~10 years has masked the flattening out of productive investment, and there will need to be a reckoning. Hopefully it's a…

It seems like smart people have been predicting that China's growth is unsustainable on a regular basis for at least 15 years... it's tough for an average HNer like myself to take the time to tell which "expert" is just blowing smoke and which expert truly has a handle on the salient facts- Guess all I can really do is simply wait and see who ends up being right...

Well, time and funding are constrained for the research, surely they must produce something, and China wouldn't mind at all.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#129

Post by alphonsegaston »

xrange wrote: post #106
Nition wrote: post #85

Earlier quoted context omitted.

Your comment goes pretty hard against the popular opinion of what happened. It would be good if you could explain your reasoning.

Not the OP, but 15,000 people died because of the tsunami. No one died from the radiation release at Fukushima and: "A comprehensive assessment by international experts on the health risks associated with the Fukushima Daiichi nuclear power plant (NPP) disaster in Japan has concluded that, for the general population inside and outside of Japan, the predicted risks are low and no observable increases in cancer rates a…

No one dying quite glibly ignores the economic and social consequences of displacing somewhere in the neighborhoods of 120,000 people.

That aside, are we to believe that no one's medical conditions were made more severe by the stress and displacement caused by this disaster? And no one died as a result? Something of the scale of Fukushima can't be so easily dismissed by this kind of cursory analysis of radiation related health risks.

Re: China Can’t Sustain Its Debt-Fueled Binge, Moody’s Says

#130

Post by ryandamm »

gitah wrote: post #46
leoc wrote: post #37

Earlier quoted context omitted.

> However, on first level principles, money is simply an abstraction; it's a medium for trading your services for other people's services. And if you become more efficient, you can buy more services with the same amount of effort and vice versa. The root cause of this increase in efficiency is technology. Pettis does discuss this at length.

Can you elaborate? From the article, Pettis assumes the following is true: 1) China has overinvested in infrastructure and manufacturing capacity to such an extent that in the aggregate the cost of additional public sector investment exceeds the present value of future increases in productivity generated by the investment and 2) China's long-term sustainable growth rate is substantially below the economy's current GD…

He elaborates on technology improvement in other articles, but it boils down to: technological improvements have a range of returns, but even the most optimistic of historical returns to technological progress can't paper over the debt-fueled boom China is currently undergoing.

Basically, qualitatively, you're right. Technological improvements can generate growth from scratch. But when you look at the historical data to try to quantify it, you see it's quite modest. Big gains have come from: women entering the workforce, electrification, containerization. The rest is incremental enough it doesn't matter in the same way.

(Part of this is how it's measured; the fact that consumers get much more value for their dollar isn't well captured, but the point remains because it's about debt-servicing, not consumer value.)

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