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
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
#52Earlier quoted context omitted.
What makes you think that the debt has to be bought?
Government debt, much like large corporate debt, almost always takes the form of bond issues. By definition, to raise debt capital via a bond issue someone needs to buy those bonds. Buying bonds is buying debt. Thus, governments cannot raise money through debt issues if people are unwilling to buy the debt.
Exactly.
And this is why credit ratings matter. Because for people to buy the bonds the credit rating needs to be high to keep the yield (interest) low.
If a country receives a less-than-stellar credit rating, the only way they can entice people to buy their bonds is by offering higher yield (interest rate) which means they have to pay back more.
Re: The Chinese Government Likely Borrowed More than the US in 2017
#53China 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…
Using per person GDP when discussing China is a cruel joke. Like most usages of per person GDP in any country, it glosses over regional disparities and (more importantly) economic equality measures like Gini coefficient.
Taking Gini coefficient into consideration, China still has a long way to go.
Re: The Chinese Government Likely Borrowed More than the US in 2017
#54Earlier quoted context omitted.
It absolutely isn't. The funny part is, for the past 12+ years voices predicting an economic collapse of China have gotten stronger and stronger, but it just doesn't happen. Every time they passed some magic number in some statistic it was all "zomg collapse is imminent!" I guess with a government like they have you have greater possibilities to cover up and postpone the effects, but who knows how this will manifest.…
Eh it's absolutely sustainable. China is a monetary sovereign. All of this debt is issued in a currency that they can literally create out of thin air. There is zero possiblity that China will default on this debt. And China has been very careful to avoid externally denominated debt. The only real risk here currency revulsion. At some point there is a risk that nobody will want the currency. But the risk of internal…
Creating currency out of thin air also creates inflation.
Inflation must be kept in check or bad things happen.
Maybe the current levels are sustainable. But not all increases in deficit are sustainable.
Re: The Chinese Government Likely Borrowed More than the US in 2017
#55So who's buying all that debt?
It is for domestic consumption, and much like Japan it is generally being held domestically. They are indebting themselves to themselves tremendously and (as is in the case of Japan) it's not necessarily a bad thing.
The story looks similar too, which is why the CPC is shifting to encouraging demographic growth (including strongly incentivizing young professionals to form families.)
Re: The Chinese Government Likely Borrowed More than the US in 2017
#56The bigger debt wins, don't you know?
Re: The Chinese Government Likely Borrowed More than the US in 2017
#57In economic terms, how is this sustainable?
Broadly, constant borrowing is sustainable, just look at any European economy. As long as your tax base grows faster than your interest payments there’s no unavoidable problem. This? It’s not sustainable. Sooner or later this will result in a correction. This could range from aggressive budgetary measures, an internal crisis all the way to China monetising its overseas investments (which are extremely extensive).
You can't compare the Euro countries to China because the European countries are borrowing in what, in essence, is a foreign currency. For those countries, constant increasing of the debt is hardly sustainable.
China has not that problem. The only danger for China is inflation (that can be controlled with, for instance, taxes), otherwise, the People's Bank of China can buy directly the debt and nothing would happen. In fact, they could just stop emitting debt, but that would be inconvenient for banks and other big investors.
Private and local government debts is a different issue.
Re: The Chinese Government Likely Borrowed More than the US in 2017
#58External debt is just 14% http://www.usdebtclock.org/world-debt-clock.html
Internal or external, I don't see the difference. From the taxpayer perspective, they are the same.
Re: The Chinese Government Likely Borrowed More than the US in 2017
#59I don’t know if this is true anymore, but isn’t Chinese private borrowing staggeringly low? And hasn’t American private borrowing jumped up again after the crash?
Looking at public numbers by themselves does not tell much of a story.
Re: The Chinese Government Likely Borrowed More than the US in 2017
#60And 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.
Certainly they’re getting 2x - 3x more per dollar they spend both because of intrinsic lower costs but also IP theft.