China debt

[Greg.D.]

Interesting article. I am not a China basher. Rather, I love China. I don't wish chaos or severe hardship on any country, either.

 

But, if you've been paying attention wrt China you must have some doubts to accompany your awe at the "miracle" that is China. This author really spells it out. Yes, he has a book to sell and it is a little political at first but this article really packs in the details. As the article says "China is now a threat to the United States not because it is strong but because it is fragile." And, if you have friends and family there (or live there) you want for a relatively painless transition to a smaller economy.

 

How China Fell Off the Miracle Path

It will be difficult for any country to grow as rapidly as 6 percent, and all but impossible for China. Nevertheless, in an effort to exceed that target, Beijing is pumping debt into wasteful projects, and digging itself into a hole. The economy is now slowing and will decelerate further when the country is forced to reduce its debt burden, as inevitably it will be. The next step could be a deeper slowdown or even a financial crisis, which will have global repercussions because seven years of heavy stimulus have turned the world’s second largest economy into a bloated giant.

 

China’s mania is now the largest ever in the postwar emerging world. After holding steady at around 150 percent of G.D.P. for much of the boom, China’s public and private debts surged after Mr. Wen’s about face in 2008, rising to 230 percent of G.D.P. by 2014. That 80-percentage-point increase is also more than three times the increase in the United States before its bubble collapsed in 2008. Since then, United States debt has held steady as a share of its economy.

 

Afterward the Davos crowd finally started to question whether Beijing could simply command its economy to grow. It looked as if the lesson might be learned in China, too, but when I visited this April, authorities had begun a new stimulus campaign, and debt was still growing three times faster than the economy.

 

....... etcetera.

 

I still take issue every time I read some expert saying that "China's workforce is aging and shrinking". If you spend an hour in China you know their productivity is low: 2 and 3 people doing the job of 1 in most other places. In fact, I worry more about jobs for the millions of graduates each year, not where will they find enough people to overstaff the hotel lobby.

[Randy W]

. . .

 

It will be difficult for any country to grow as rapidly as 6 percent, and all but impossible for China. Nevertheless, in an effort to exceed that target, Beijing is pumping debt into wasteful projects, and digging itself into a hole. The economy is now slowing and will decelerate further when the country is forced to reduce its debt burden, as inevitably it will be. The next step could be a deeper slowdown or even a financial crisis, which will have global repercussions because seven years of heavy stimulus have turned the world’s second largest economy into a bloated giant.

 

. . .

 

Afterward the Davos crowd finally started to question whether Beijing could simply command its economy to grow. It looked as if the lesson might be learned in China, too, but when I visited this April, authorities had begun a new stimulus campaign, and debt was still growing three times faster than the economy.

....... etcetera.

 

I still take issue every time I read some expert saying that "China's workforce is aging and shrinking". If you spend an hour in China you know their productivity is low: 2 and 3 people doing the job of 1 in most other places. In fact, I worry more about jobs for the millions of graduates each year, not where will they find enough people to overstaff the hotel lobby.

 

 

 

 

China has some advantages in that they are not REQUIRED to "stay the course" or to "deliver" on campaign promises - this book is already out of date. See http://candleforlove.com/forums/topic/47391-in-the-financial-news/?p=628162. But of course it remains to be seen whether they can make the right choices or whether their decisions will have the right effects and timing.

 

I'd love to come back in about 100 years to see how it's all turned from a historical perspective, free of the pundits who are pushing their own point of view. And then again in about 500 years.

 

I think that statement of yours that I highlighted there says a lot about current conditions in China.

Edited June 4, 2016 by Randy W (see edit history)