Standard Chartered Bank International experts recently estimated that China’s current debt-GDP ratio is 251%, showing the enormous challenges faced by the Chinese economy. China's overall economic growth keeps slowing down, while debt keeps increasing. Experts believe it is impossible to rely on printing money to solve the financial crisis. Once the crisis comes to the surfaces, Chinese people will suffer more compared with the crisis in Western economies where the government takes the burden.
2014-07-25 07:49 PM EST
NDT.TV
Standard Chartered Bank International experts recently estimated that China’s current debt-GDP ratio is 251%, showing the enormous challenges faced by the Chinese economy. China's overall economic growth keeps slowing down, while debt keeps increasing. Experts believe it is impossible to rely on printing money to solve the financial crisis. Once the crisis comes to the surfaces, Chinese people will suffer more compared with the crisis in Western economies where the government takes the burden.
Standard Chartered Bank head of research for Greater China, Stephen Green published an article on July 21, stating that: China's total debt to GDP ratio reached 251% at end of June, far higher than 147% at the end of 2008, and 215% published by Chinese Communist Party (CCP) in 2013.
US-based economic commentator Ma Jiesen: "The figures are just estimates. The actual number is a CCP’s state secret. There are a lot of hidden debts. For example, a local government can set up a company and get loans in the name of this company. These companies are run in different forms, some are directly managed by the local government and some are joint ventures."
China financial think tank researcher Gong Shengli revealed, that expenses from top to bottom of the CCP, human resources engineering, public relations, united front, writers and CCP party committee are all kept confidential.
Gong Shengli: "How big is the black hole of China’s assets can only be estimated, not judged. Some data behind the scenes are not included. The data CCP publishes usually do not include the party’s expenses, which by itself are huge."
China's economic growth keeps slowing down, but the debt has continued to increase. Empty apartment buildings and overproduction of solar panels, steel and cement indicate serious misallocation of capital.
Nevertheless, British Financial Times’s article on July 22 said Chinese government did not curb credit lending, but allowed accelerated credit lending, for fear of possible "hard landing" caused by slow economic growth and the real estate market fall. The reported said in June that China’s new credit reached 1.96 trillion yuan, highest since March and almost doubled year over year.
*** The first risk from China’s overall debt is the over-concentrated real estate field. Real estate loans are long-term and with poor mobility. Once the bubble bursts, it will quickly expand financial risks.
The second risk is the local financing platform debt. Vice President of Chinese Academy of Social Sciences Li Yang published an article in 2013 stating that: the debt of local financing platform is mostly the result of excessive pursuit of GDP in the last decade. The main focus is construction of urban infrastructure, especially large cities, or even "ghost towns," big squares and large airports.
The character of local debit is long-term with poor liquidity and very low return. The return on revenue simply cannot cover the debt principal and interest, and referred to as "loans and debt that never mature."
In addition to China, several of the few high debt ratio economies are high-income economies. Last year, U.S. debt to GDP was about 260%, while the UK was 277%. According to the Standard Chartered’s calculations, Japan is the highest with 415%. So, what is the difference between China and these countries?
Jason: "Western society's main source of debt is the huge commitment to social welfare. As long as social welfare is reduced a little, debt will be cut a lot. While in China corrupt officials take away the most. When the financial situation tightens, corrupt officials use their power to plunder more. It causes direct social conflicts. When the U.S reduces the deficit, government officials are on the front line.”
Two years ago, China’s city real estate was 385% of GDP. U.S. real estate was only 172% even during the real estate peak, causing the 2008 financial crisis.
China’s critic Niu Dao pointed out that in order to avoid a crisis, CCP printed money on steel and concrete. Once currency is seriously inflated, it caused asset price hike. The total economy is over-reliant on debt expansion.
Despite the CCP printing money twice as much as GDP, housing prices continued to decline. Ma Jiesen believes that issues in China cannot be solved by printing money. Signs indicate China's economic and political issues are going toward a breaking point.
- See more at: http://www.ntd.tv/en/programs/news-politics/china-forbidden-news/20140725/178509-chinas-debt-is-25-times-gdp--western-comparisons.html#sthash.ZEQU95Oi.dpuf
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In addition to China, several of the few high debt ratio economies are high-income economies. Last year, U.S. debt to GDP was about 260%, while the UK was 277%. According to the Standard Chartered’s calculations, Japan is the highest with 415%. So, what is the difference between China and these countries?
Jason: "Western society's main source of debt is the huge commitment to social welfare. As long as social welfare is reduced a little, debt will be cut a lot. While in China corrupt officials take away the most. When the financial situation tightens, corrupt officials use their power to plunder more. It causes direct social conflicts. When the U.S reduces the deficit, government officials are on the front line.”
Chân thành cám ơn Quý Anh Chị ghé thăm "conbenho Nguyễn Hoài Trang Blog".
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