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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

#71

Post by Four_Star »

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…

If the US decided to spend trillions of dollars a year building skyscrapers in Alaska it could be 'growing' at 7% a year too.

http://www.businessinsider.fr/us/china-ghost-cities-satellit...

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

#72

Post by woah »

Four_Star wrote: post #71
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…

If the US decided to spend trillions of dollars a year building skyscrapers in Alaska it could be 'growing' at 7% a year too. http://www.businessinsider.fr/us/china-ghost-cities-satellit...

If the US decide to spend trillions building skyscrapers its cities, then housing might be affordable

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

#73

Post by dnomad »

frogpelt wrote: post #54
dnomad wrote: post #43

Earlier quoted context omitted.

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.

That's now how any of this works. That's certainly not how inflation works.

At some point, particularly given the last 40 years of evidence to the contrary, people need to simply accept that monetary expansion does not "cause" inflation [1]. Inflation is not a monetary phenomenon at all. Inflation is a price level [2] phenomenon largely driven by trade imbalances. Inflation is about market power, or what some call pricing power. The common case here, btw, is when your external partners from whom you need to import critical goods get even a little bit pricing power then you will get inflation. China is seeking to own all its externals and deliberately suppress any such pricing power not driven by its own banks.

[1] https://www.bloomberg.com/news/articles/2018-03-22/the-great...

[2] http://bilbo.economicoutlook.net/blog/?p=10554

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

#74

Post by RobertoG »

frogpelt wrote: post #52
vonmoltke wrote: post #46

Earlier quoted context omitted.

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.

In July 2012 the credit rating for many Euro countries was low and the borrowing costs very high.

Mario Draghi, the President of the Central European Bank (who can emit so many Euros as they wish with typing something in a computer) made a statement (1) that he will defend the Euro.

The next day the debt problem was solved.

'The markets' know that governments that emit debt in their own currency, are not depending of ratings or people buying bonds because they control the currency.

The European case is complicated because the Euro is kind of a foreign currency for the Euroarea, but the China case is obvious.

(1). https://www.telegraph.co.uk/finance/financialcrisis/9428894/...

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

#75

Post by seanmcdirmid »

fps_doug wrote: post #7
adreamingsoul wrote: post #2

In economic terms, how is this sustainable?

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.…

Nobody with any credibility has predicted collapse. Recession or crash, yes, but not collapse. China is subject to economic cycles just like every other country is.

The “they keep predicting economic collapse” is a huge red herring used by pro Chinese media to discredit western media who never made such claims out of a few fringe elements like Gordon Chang.

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

#76

Post by RobertoG »

gonvaled wrote: post #69
RobertoG wrote: post #57

Earlier quoted context omitted.

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.…

A foreign currency, controlled by a foe. The EU should do everything in its power to end the unfair dollar hegemony.

I was talking about the Euro, not the Dollar.

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

#77

Post by dpark »

EGreg wrote: post #64
rdlecler1 wrote: post #60

Earlier quoted context omitted.

Certainly they’re getting 2x - 3x more per dollar they spend both because of intrinsic lower costs but also IP theft.

Did China agree it is theft? The US doesn’t respect trademarks like Kobe Beef, Parmesan Cheese etc. http://www.internationaltrade.law/blog/why-youve-probably-ne...

> I can pretty much confirm that I have never had real Parmesan Cheese, and neither have you.

That is a bizarre claim. If you’ve only ever bought pre-grated Kraft “Parmesan”, that might be true. But it’s not difficult to buy Parmigiano-Reggiano in nicer grocery stores.

Also the EU has hundreds of special designations. It’s not surprising that the US would decline to give a blanket deference to EU law in this area.

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

#78

Post by ythn »

woah wrote: post #72
Four_Star wrote: post #71

Earlier quoted context omitted.

If the US decided to spend trillions of dollars a year building skyscrapers in Alaska it could be 'growing' at 7% a year too. http://www.businessinsider.fr/us/china-ghost-cities-satellit...

If the US decide to spend trillions building skyscrapers its cities, then housing might be affordable

Housing in Alaska already is affordable...

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

#79

Post by microdrum »

ggm wrote: post #6
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.

The thing is, they don't show the hardware which would go with the spend. The construction equipment used to occupy the Spratleys has to then be followed by new ships, new airplanes, new heavy armor. Domestically, the provinces are very powerful. the PLA is not out in force in complex, expensive hardware, its paramilitary presence which is not a huge increasing cost given mandatory post-university universal conscript…

They are literally manufacturing islands in the ocean.

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

#80

Post by seanmcdirmid »

MLR wrote: post #12
adreamingsoul wrote: post #2

In economic terms, how is this sustainable?

China is (officially) growing at ~7% per year right now, so adding $700 billion to their debt pile barely changes the debt/GDP ratio, it might even still fall but I'd have to check the exact figures.

The official reported rate is less than 7%, the actual rate is probably 5-6%. But the problem is the growth of debt, not its absolute value. They most definitely have to hit the brake on growth sometime soon, or they are screwed. Even the Chinese governmebt states this, we are only debating the consequences of hitting the brakes, not whether it will happen or not.
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