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China’s dodgy-debt double act

economist.com

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Re: China’s dodgy-debt double act

#51

Post by throwaway4good »

voisin wrote: post #49
throwaway4good wrote: post #34

Earlier quoted context omitted.

Another perspective - central bank lending rates: China: 3.875% ECB and FED: about 0.25%

I think you are implying that China has room to drop rates to stimulate the economy, but the rates you quote are nominal rather than real. I.e. they don’t subtract off inflation. China May be less capable of dropping rates without stoking greater inflation and massively upsetting social order. I may be misinterpreting your point though.

Yes. And the rmb is rising relative the usd and euro. Point is they have plenty of space unlike the rest of us.

Re: China’s dodgy-debt double act

#52

Post by dragonelite »

throwaway4good wrote: post #42
dragonelite wrote: post #41

Earlier quoted context omitted.

I 100% believe that the main reason a country stays stuck in the middle income trap is its capability to create high tech IP which the nation can use to suck up what I would a global rent for lending out its IP. That why the patent system is so toxic for the global south its like cutting off the steps on the value chain stair.

10 years ago people were also chatting about China being caught in the middle income trap because China was unable to create its own global brands and original products, and was destined to be a cheap factory for western brands forever, never would be rich enough to have an internal market. Today we have global brands like Xiaomi, Huawei, Tiktok in every corner of the planet. And there is just going to be more of it.

When I visited family in the Philippines every dam mall or street market I visited you saw Oppo, Vivo, Huawei and Apple stands. It was kind of a shock compared to here in western Europe.

And from what I can gather Chinese EV car brands are now just entering the European markets. The EV car market has pretty much has been a hard reset of the car industry where new players and old player need to duke it out. Its kind of exciting as someone with a Asian background to see so much happening in Asia to the point im planning on using the next 3~5 years to learn to read and listen to spoken Chinese. Just so I don't have to see it all through a western politically and racially biased lens.

Re: China’s dodgy-debt double act

#53

Post by baybal2 »

throwaway4good wrote: post #17
baybal2 wrote: post #16

The surreally large "shadow debt" that modern China has accumulated was my undergrad essay topic 10 years ago. Since then, it seem to have grown from "surreally large" to "absurdreally large" Go to any big Chinese city. Look around. Every skyscraper around is a mountain of secret debt few times its value. China is really very close to Sri Lanka in how GDP numbers were financially engineered from massive, but well dis…

So why were you wrong, 10 years ago, when you assumed that the debt burdens were unsustainable?

These 10 years proved me wrong, and am not sharing much of the optimist opinion in other replies.

I envisioned a scenario of some "backroom deal" at a great public expense, and indeed something like that did happen.

It didn't work. Well in a sense, there were giant bailouts, but that only fired up the furnace, and even more "stealth debt" entered the economy.

China has a few thousands more of Evergrandes, and HNAs lined up.

I bet it will never be fixed within the lifetime of regime, even at the expense of its interest in self-preservation.

And it's because Evergrandes, and HNAs are largely CPC's own making — these companies are the biggest sources of income for local governments, and families of high rank communists: defraud lenders, buy overpriced land from local governments, and hide it super duper well, so your mountain of debt turns into asset, seemingly legitely enriching kids of party members on your board.

It's a very strange scheme of state authorised credit fraud on a nation scale.

Re: China’s dodgy-debt double act

#54

Post by throwaway4good »

baybal2 wrote: post #53
throwaway4good wrote: post #17

Earlier quoted context omitted.

So why were you wrong, 10 years ago, when you assumed that the debt burdens were unsustainable?

These 10 years proved me wrong, and am not sharing much of the optimist opinion in other replies. I envisioned a scenario of some "backroom deal" at a great public expense, and indeed something like that did happen. It didn't work. Well in a sense, there were giant bailouts, but that only fired up the furnace, and even more "stealth debt" entered the economy. China has a few thousands more of Evergrandes, and HNAs li…

I don't think what you are writing is incorrect. And you are certainly correct in that the capital controls are necessary otherwise all these "ill gotten gains" would flee the country.

However I think you underestimate how long time this can be kept up for. China still has many years of out-sized growth ahead of it, and that growth will paint over the bad debt.

It will end at one point, but not now.

Re: China’s dodgy-debt double act

#55

Post by guerby »

DisjointedHunt wrote: post #40
thaumasiotes wrote: post #37

Earlier quoted context omitted.

> "The level of debt is jaw-dropping. The private non-financial sector owed the equivalent of 222% of GDP at the end of 2020. Most of that sits with companies. By comparison, private non-financial debt in America is 164% of GDP." So they have about a third more debt than we do? "Jaw-dropping" seems like an overstatement.

The US Dollar is the primary currency in which trade is conducted in much of the world. The US banking and financial system has much of the most powerful entities in the world relying on it for their future financial gains. China, by comparison is a relatively more fragile economy with much of the growth there coming from manufacturing and real estate , both of which are sectors that are starting to struggle because,…

China has currently 3.2 trillions USD worth of foreign currency reserves

https://tradingeconomics.com/china/foreign-exchange-reserves

(And 0.1 trillions in gold reserves FWIW.)

Re: China’s dodgy-debt double act

#56

Post by starfallg »

dragonelite wrote: post #36
throwaway4good wrote: post #9

It seems like the Chinese authorities are trying to deleverage by explicit policy (very evident in the stock market), here when the leverage in the western economies is at its highest. We in the west have a tendency to overestimate China's debt problems by comparing the numbers and ratios to that of the west. Forgetting that 1) China is very big and has a lot of people 2) most people in China are poor and live essent…

This is what I have heard more from other China investing podcasts, that the next China is in rural China. Not ASEAN, not India but rural China will become the next China. Like you said most of them are probably just getting by. Moving them to the cities and make sure the next generation is educated will give China its next two decades of growth. From what I also gathered in land rural China grows at like 10% plus a…

Most of China's industry is already powered by rural China. Migrant workers (Mingong/民工) are the workforce manning the factories. They number roughly 300 million.

Re: China’s dodgy-debt double act

#57

Post by yrro »

chunghuaming wrote: post #10

Chinese citizen living in US, posting anonymously for obvious reason. Huarong and evergrande are just the tip of the iceberg. If you wish to know what all the things fester below for CCP, here's a very timely summary video from laowhy86, one of the YouTube expert on China https://www.youtube.com/watch?v=RpwtZLzDM_o Unfortunately you will not find many outspoken Chinese native citizen on YouTube, for they all fear CCP…

> one of the YouTube expert on China

Hmmmmmmm. His videos are flashy, watchable... and incredibly poorly researched.

I am incredibly unimpressed by his "I Found The Source of the Coronavirus" video. And frankly it calls into question all his other videos.

https://www.youtube.com/watch?v=ab-r0capbzk

Re: China’s dodgy-debt double act

#58

Post by another_story »

throwaway4good wrote: post #14
another_story wrote: post #12

Earlier quoted context omitted.

They have been investing in infrastructure, housing and energy. The return on that investment has been decreasing. The CCP has been kicking the can down the road as best it can trying to maintain growth numbers, which in part acts as justification for its single party rule.

You (and most other western commentators) underestimate just how long the road is.

I never put a timeline on it.

Re: China’s dodgy-debt double act

#59

Post by another_story »

throwaway4good wrote: post #14
another_story wrote: post #12

Earlier quoted context omitted.

They have been investing in infrastructure, housing and energy. The return on that investment has been decreasing. The CCP has been kicking the can down the road as best it can trying to maintain growth numbers, which in part acts as justification for its single party rule.

You (and most other western commentators) underestimate just how long the road is.

I'm Chinese and not living in the west. Don't make assumptions.
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