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The Chinese Government Likely Borrowed More than the US in 2017

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Re: The Chinese Government Likely Borrowed More than the US in 2017

#101

Post by seanmcdirmid »

icebraining wrote: post #99
KaoruAoiShiho wrote: post #93

ITT: Nobody knows what they're talking about. People need to stop assuming all governments work identically and that numbers are comparable in any way. In China local governments COLLECTS NO TAXES, thus they fund all their expenditures by debt. In 2 years there's going to be widespread tax reform and all this debt will be wiped away.

Who lends money to a local government which has no revenue?

They make money by selling land, and they also get a smallish cut of the VAT (replacing business taxes they used to get). They also outsource their debt spending to locally controlled SOEs who theoretically should be able to make money by being an state-owned enterprise.

Also, they make the state-owned banks lend to them regardless, at a low interest rate since there is an implicit garauntee they won’t default.

It isn’t really sustainable. It is only a matter of time before China introduces a property tax to fund local governments.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#102

Post by nabla9 »

KaoruAoiShiho wrote: post #93

ITT: Nobody knows what they're talking about. People need to stop assuming all governments work identically and that numbers are comparable in any way. In China local governments COLLECTS NO TAXES, thus they fund all their expenditures by debt. In 2 years there's going to be widespread tax reform and all this debt will be wiped away.

Good point. Government debt can be understood as delayed taxation. If private sector has higher productivity, delaying taxation may be the best option for overall growth when debt to GDP is acceptable.

Other thing that totally changes the discussion is if the debt in local currency or in foreign currency.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#103

Post by yellowstuff »

socrates1998 wrote: post #97

China, like all other indebted nations, will seem very stable and then it will collapse in a fury. Could happen in a year or 10 years, it's very hard to predict these things. China's solution has always been to growth itself out of problems. At some point, that becomes impossible.

It is not the case that nations with lots of debt always collapse. EG, since inception the US has always had debt at the Federal level, except when Andrew Jackson paid it off, which was economically disastrous and plunged the country into a 6 year long depression.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#104

Post by icebraining »

Theodores wrote: post #90
chvid wrote: post #18

China is still a developing nation. That means that China can invest in infrastructure (roads, trains, airports, education) which have high real return making the increase in debt much less of a problem. This is also the reason why China has grown persistently 7-10% over the past two decades compared to USA which have grown 2-3% in the same period. Per person China's GDP is less than a fifth of the US hinting that th…

China spend money on infrastructure, meanwhile in the West there is 'Quantitative Easing' with money going straight to the banks. As you state there is real return in infrastructure expenditure - roads, trains, airports, education is genuine investment. A business case can be made for putting in a new 300kmh train set that spans the country. Over in the West we don't get that, instead we have to pay untold billions t…

We have quite a few high-speed trains here in the West - you can go from Sevilla to Berlin or Napoli in them.

I agree that the GDP is a flawed metric, though.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#105

Post by function_seven »

seanmcdirmid wrote: post #85
known wrote: post #51

US is exporting $500 billion currency to China; And China is investing that money back in https://en.wikipedia.org/wiki/United_States_Treasury_securit... resulting in $1,181 billion debt to USA

If you include HK and Taiwan, they own a whopping $1500 billion in US debt via treasuries. But these are just savings instruments for them, a way to deal with excess foreign reserves without messing with their own exchange rates. It isn’t like the USA is begging them to buy treasuries, more like treasuries are provided as a service that makes the dollar so useful in trade. The yuan does not provide the same service t…

$1,500 trillion? Did you mean to say $15 trillion, or am I misunderstanding?

Re: The Chinese Government Likely Borrowed More than the US in 2017

#106

Post by throwaway5752 »

Almost nobody here is interpreting this correctly. Debt gets sold, and buyers are signaling that they believe they will be repaid in an adequate manner (stable government, currency) and that maintaining reserves to the currency of that nation is desirable.

This is exactly what you expect to see happen as China further eclipses the US as the world's largest economy and the renminbi supplants the dollars as the choice of reserve currency.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#107

Post by seanmcdirmid »

function_seven wrote: post #105
seanmcdirmid wrote: post #85

Earlier quoted context omitted.

If you include HK and Taiwan, they own a whopping $1500 billion in US debt via treasuries. But these are just savings instruments for them, a way to deal with excess foreign reserves without messing with their own exchange rates. It isn’t like the USA is begging them to buy treasuries, more like treasuries are provided as a service that makes the dollar so useful in trade. The yuan does not provide the same service t…

$1,500 trillion? Did you mean to say $15 trillion, or am I misunderstanding?

Typo-fixed.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#108

Post by forapurpose »

vondur wrote: post #62
Bucephalus355 wrote: post #3

And this is the deficit we know about. In reality it could be much larger, something like 1000% of GDP. The situation is the same with China’s military budget. In reality it’s probably 2x or 3x larger than the official numbers we have.

I've read that China spends more on internal security rather than normal Military spending.

At least it used to be said by China experts that the army was built to suppress internal dissent and not to repel foreign invaders, and certainly not for foreign wars. Since then China has invested heavily in rebuilding its military but I don't know how that mission of the army has changed.

China's geography, size, and population makes a foreign land invasion very unlikely, beyond some strips of land disputed with Russia and India or a tide of refugees from North Korea. Think of how expensive and difficult Iraq and Afghanistan are for the U.S.; China would be orders of magnitude beyond that.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#109

Post by AnthonyMouse »

RobertoG wrote: post #92
ChrisLomont wrote: post #86

Earlier quoted context omitted.

Adding infrastructure has a higher rate of return when there is less infrastructure to begin with. Adding one interstate highway system greatly increased US economic mobility. Adding a second would not have such benefit. So China, not having the infrastructure the US does, likely gets a benefit on doing projects that would be a loss in the US.

So, the reason because the US doesn't invest in infrastructure is because the ROI is not high enough?

> So, the reason because the US doesn't invest in infrastructure is because the ROI is not high enough?

The reason the US doesn't invest in infrastructure is because the benefits go to everyone instead of a specific party interested enough to lobby for it.

The ROI is the much the same in the US as it is elsewhere, provided the investment is made where it's needed rather than on pork barrel projects. For example, the value of building a bridge is X, but that's also the value of maintaining/replacing it because if it collapses or has to be closed for safety reasons then you no longer have a bridge. Moreover, you can productively build things like new subway lines in cities that are growing because that's where the demand exists to justify the cost.

The lobbying problem is where we've started to see this "public private partnership" scam show up. Then you have a specific party interested enough to lobby for it, but it's because they intend to rent seek on public infrastructure by taking the public's money and then putting up a gate and charging them a second time for admission. Because $100 is a lot, but if you pay $75 in taxes and $75 in tolls then it's less, right? And if that discourages productive use of sunk cost infrastructure and is a regressive tax on the poor, let's try not think too much about that.

Re: The Chinese Government Likely Borrowed More than the US in 2017

#110

Post by bduerst »

icebraining wrote: post #99
KaoruAoiShiho wrote: post #93

ITT: Nobody knows what they're talking about. People need to stop assuming all governments work identically and that numbers are comparable in any way. In China local governments COLLECTS NO TAXES, thus they fund all their expenditures by debt. In 2 years there's going to be widespread tax reform and all this debt will be wiped away.

Who lends money to a local government which has no revenue?

No tax revenue != no revenue. They also have assets.
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