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China's Subprime Crisis Is Here

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41–50 of 219 posts

Re: China's Subprime Crisis Is Here

#41

The American media seems to jump at any opportunity to dismiss China as an economic threat. It makes us feel more secure but leads to a public informed only about one side of China's story. Namely the part our ego can handle. China has regularly surpassed the US in number of cars sold since 2009. China also holds more US debt than any other country. Another way to put that is the US government owes China over 1 trill…

  China also holds more US debt than any other country
... except the US and domestic sources, which hold 2/3rds of all our debt. In other words, domestic sources hold over 9x the debt that China does.

Re: China's Subprime Crisis Is Here

#42

The American media seems to jump at any opportunity to dismiss China as an economic threat. It makes us feel more secure but leads to a public informed only about one side of China's story. Namely the part our ego can handle. China has regularly surpassed the US in number of cars sold since 2009. China also holds more US debt than any other country. Another way to put that is the US government owes China over 1 trill…

US treasuries are at historically low rates -- if China dumped 'em all it probably wouldn't move the needle that much. And the reason they hold so many is not as some control play against the US -- its because it was the best way to devalue their currency enough to support exports.

How it looks depends a lot on your bias. The fact remains that China can soak up $1T of US liquidity.

Re: China's Subprime Crisis Is Here

#43
There's a conjecture, in economics, that out of a fixed exchange rates, free capital flows and a sovereign monetary policy, a country can only pick two. This is known as the Impossible Trinity [1].

The United States plays strategy b, relinquishing a fixed exchange rate. Greece plays a, trading away its monetary-policy sovereignty within the eurozone.

China is trying to move from c (ex free capital flows) to b (ex fixed exchange rates). In the process, it's caught in the Impossible Trinity. Either coördinated decisiveness or some combination of a currency and/or capital-outflow will force them into a stable configuration.

[1] https://en.m.wikipedia.org/wiki/Impossible_trinity

Re: China's Subprime Crisis Is Here

#44

The American media seems to jump at any opportunity to dismiss China as an economic threat. It makes us feel more secure but leads to a public informed only about one side of China's story. Namely the part our ego can handle. China has regularly surpassed the US in number of cars sold since 2009. China also holds more US debt than any other country. Another way to put that is the US government owes China over 1 trill…

I don't really know whether the media is biased against China, it's certainly plausible, but in any case you said literally nothing about the actual situation the story is describing.

Re: China's Subprime Crisis Is Here

#46

The American media seems to jump at any opportunity to dismiss China as an economic threat. It makes us feel more secure but leads to a public informed only about one side of China's story. Namely the part our ego can handle. China has regularly surpassed the US in number of cars sold since 2009. China also holds more US debt than any other country. Another way to put that is the US government owes China over 1 trill…

Those are strange metrics of success you chose: number of cars produced annually, amount of public debt held.

I'd have gone with GDP, military strength, set of advantageous alliances, or some other measure of economic, military, or political power.

Re: China's Subprime Crisis Is Here

#47

Earlier quoted context omitted.

US treasuries are at historically low rates -- if China dumped 'em all it probably wouldn't move the needle that much. And the reason they hold so many is not as some control play against the US -- its because it was the best way to devalue their currency enough to support exports.

How it looks depends a lot on your bias. The fact remains that China can soak up $1T of US liquidity.

Yes, they 'can' soak up $1T of liquidity the way I 'can' lock myself into my house and set it on fire. Common sense suggests they will never actually do so.

Re: China's Subprime Crisis Is Here

#48

The American media seems to jump at any opportunity to dismiss China as an economic threat. It makes us feel more secure but leads to a public informed only about one side of China's story. Namely the part our ego can handle. China has regularly surpassed the US in number of cars sold since 2009. China also holds more US debt than any other country. Another way to put that is the US government owes China over 1 trill…

China can do things at a scale the West in general, and the US in particular can't even fathom.

I was in Tibet with some friends in October. At one point, our tour bus was detoured, because the bridge on our scheduled route wasn't big enough for it, so we drove a couple hours out of our way, and just happened to pass a 10MW solar plant. In the middle of Nowhere, Tibet. A thing we wouldn't even have seen if we hadn't had to detour down a dirt track road, still under construction (to the point that we had to stop and wait for the equipment that was carving the road bed out of the mountain face to clear enough room for our bus to pass). Who knows how many other such hidden infrastructure gems there are, down other roads that tourists don't get permission to use?

Later, we passed a seemingly endless convoy of dozens of fuel tankers and flatbeds loaded with construction equipment — all military green — headed south, as we were returning to Lhasa from Mt. Everest base camp. Doing some digging, it turns out this materiel was all accumulating at the Nepalese border.

See, just a week or two previously, Nepal had passed its new constitution, which favored closer ties with China over India. India, used to being Nepal's big brother and pushing it around, subsequently closed their border with Nepal — the border which, by treaty, was the only route through which Nepal could import fuel. Consequently, Nepal was starting to experience a ridiculous fuel shortage. (Talking with a taxi driver in Kathmandu a few days after having seen this convoy, the petrol rationing was down to 7L per family per week. Our flight from Kathmandu to Lhasa — about a 90 minute flight, going the long way, so people could get a view of Everest — was on an Air China A340, because they needed to send a plane that could carry enough fuel for the round trip, as there wasn't enough Jet A at KTM for the return.)

These convoys of fuel and construction equipment were waiting for a new treaty to be signed between Nepal and China, allowing emergency fuel imports from China. The purpose for all the construction equipment? The Nepalese side of the road that runs from Kathmandu to Lhasa was still destroyed from the Gorkha earthquake. The estimates I was reading suggested that, once the border was opened, the Chinese would be able to rebuild the road from the border to Kathmandu in about three days, and have fuel continually running down the repaired road as long as Nepal needed it.

China just happened to have the materiel on hand, in Tibet, to respond within days of India closing the border and Nepal going into crisis, with sufficient manpower, equipment, and fuel to rebuild a hundred-odd kilometers of mountain road in a few days and keep a city of a million people, and who knows how much of the rest of Nepal, from collapsing.

But they're completely backwards and corrupt, and have no idea what they're doing.

Re: China's Subprime Crisis Is Here

#49

Earlier quoted context omitted.

US treasuries are at historically low rates -- if China dumped 'em all it probably wouldn't move the needle that much. And the reason they hold so many is not as some control play against the US -- its because it was the best way to devalue their currency enough to support exports.

How it looks depends a lot on your bias. The fact remains that China can soak up $1T of US liquidity.

I'm not very familiar with this issue but could you please explain how China can soak up $1T of LIQUIDITY when most of this $1T is, as I understand it, in bonds. Wouldn't this debt being in bonds mean that 1) there is a schedule of payments that have already been accounted for in the budget and 2) that they cannot "call in" the debt?

Certainly China could refuse to buy additional bonds that we put out which may impact liquidity but there are always buyers for US debt - Japan was the largest foreign holder of US debt just last year.

Re: China's Subprime Crisis Is Here

#50
post #9

Ahhh 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…

> 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. This has been tried by many governments and has a well-established track record as a disasterous solution. I believe the following is a well-established consensus in economics (though I may misremember some details): Printing money…

You don't generally get much inflation in a credit crisis so your points tend not to be the main issue.
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