Concerns growing over scale of China’s debts

[Gregor Clegane]

Concerns growing over scale of China’s debts
20 August 2017

A prominent Chinese economist has warned that the country will accumulate $7.6 trillion worth of the so-called "bad" debt by the end of 2017.

The prominent Chinese economist has also warned that the country’s growing debt is already affecting not only its domestic economy but would also eventually affect other countries, as well.
"Everyone knows there’s a credit problem in China, but I find that people often forget about the scale. It’s important in global terms," Charlene Chu said in an interview with the Financial Times .
Chu, who made her name warning of the risks from China’s credit binge, predicted that by the end of the year, the country will accumulate $7.6 trillion worth of the so-called "bad" debt.
The comment came the day after the International Monetary Fund (IMF) warned that Chinese debt could be the reason for the next financial crisis as borrowing becomes unsustainable, The Financial Times added in its report.
"International experience suggests that China’s credit growth is on a dangerous trajectory, with increasing risks of a disruptive adjustment or a marked growth slowdown," the IMF report said.
The IMF said China needed three times as much credit last year to achieve the same amount of growth as in 2008.
A report in June by the Institute of International Finance (IIF) said China's total debt was over 304 percent of GDP as of May this year, added the
Financial Times .
Moreover, “the household debt-to-GDP ratio hit an all-time high of over 45 percent in the first quarter of 2017 —well above the Emerging Market average of around 35 percent,” the IIF said.
Since the 2008 financial crisis, China has become the growth engine of the global economy. The country has contributed to more than half the increase in world's GDP in recent years.

http://www.presstv.ir/Detail/2017/08/20/532309/Concerns-growing-over-scale-of-Chinas-debts-

 

[Gregor Clegane]

https://www.cnbc.com/2017/07/18/debt-problems-are-sinking-three-major-chinese-companies.html

 

[ashok321]

A country, which has a hard currency, does not need to worry. Unlike India. Unlike India, whose currency is not even fully convertible, let alone being a hard currency.

Imagine one thing here. Even the South African Rand is fully convertible.

And the China's currency is hard currency, one which is reflected from World Bank/IMF's basket of currencies:

On currency, while the China is a cheese - India is a chalk.

'As different as chalk and cheese' - the meaning and origin of this phrase

My compatriots are busy opening threads to counter China without merit - but with jealousy, yes.

 

[karl wang]

We Chinese don't worry about it at all. Anyway, We owe money to ourself. it's just a piece of cake.

 

[ashok321]

I fail to understand these jealous Indians opening such frivolous threads that can not be backed up with facts to substantiate how is India ahead of China.

In fact India is nowhere near China is something else, but India being nowhere close near tiny winy South Korea is big thing.

Let the CIA Factbook explain:

 

[faithfulguy]

I fail to understand these jealous Indians opening such frivolous threads that can not be backed up with facts to substantiate how is India ahead of China.

In fact India is nowhere near China is something else, but India being nowhere close near tiny winy South Korea is big thing.

Let the CIA Factbook explain:

View attachment 420430

Well, no one is predicting the fall of Indian economy.no one would need to for obvious reasons.

 

[ashok321]

The US is having 19 trillions of debt. Whats happening to its dollar?
Nothing!

US government $19 trillion debt not a problem - Business Insider

Indians here do not know nuts & bolts of International currency dynamics/

 

[Providence]

Chinese debt can potentially be a problem in future.

They are however tackling the debt issue surprisingly well as compared to many other countries !

 

[kris]

I fail to understand these jealous Indians opening such frivolous threads that can not be backed up with facts to substantiate how is India ahead of China.

In fact India is nowhere near China is something else, but India being nowhere close near tiny winy South Korea is big thing.

Let the CIA Factbook explain:

View attachment 420430

These jealous Indians...
Thank you for saying this

Now change your flag, stop calling yourself Indian please

 

[JSCh]

Read the origin to see where the figure come from.

Who knows, maybe you can become her fan and plan with her advise. Good luck !!!!

Prominent China debt bear warns of $6.8tn in hidden losses
Influential analyst believes government-enforced stability lets hidden risks fester

August 16, 2017
by: Gabriel Wildau in Shanghai

One of the most influential analysts of China’s financial system believes that bad debt is $6.8tn above official figures and warns that the government’s ability to enforce stability has allowed underlying problems to go unchecked.

Charlene Chu built her reputation as China banking analyst at credit rating agency Fitch, where she was among the earliest to warn of risks from rising debt, especially in the country’s shadow banking system.

Today many of her original views — such as concern about Chinese banks concealing risky credit in off balance sheet vehicles — have become consensus among analysts.

“Everyone knows there’s a credit problem in China, but I find that people often forget about the scale. It’s important in global terms,” Ms Chu said in an interview by phone from New York.

Ms Chu left Fitch in 2014 to help launch the Asia operation for Autonomous Research, which specialises in analysis of financial institutions.

In her latest report, Ms Chu estimates that bad debt in China’s financial system will reach as much as Rmb51tn ($7.6tn) by the end of this year, more than five times the value of bank loans officially classified as either non-performing or one notch above. That estimate implies a bad-debt ratio of 34 per cent, well above the official 5.3 per cent ratio for those two categories at the end of June.

China’s problem with borrowing came under the spotlight this week when the International Monetary Fund issued a warning about Beijing’s reluctance to rein in “dangerous” levels of debt.

The fund blamed Beijing’s tolerance of high debt levels on its goal of doubling the size of the economy between 2010 and 2020. “The [Chinese] authorities will do what it takes to attain the 2020 GDP target,” the IMF said.

Ms Chu began attracting attention in 2011 with her proprietary estimates of China’s total debt, in which she supplemented central bank data with her own assessment of hidden credit not captured by official figures.

Ms Chu is among the most bearish observers of China, and some analysts question her methodology. In particular, her estimate of Rmb51tn in bad debt is based on average credit losses across other 11 other economies that previously experienced rapid debt increases comparable to China, including Japan in 1985-97 and the US in 2000-07.

But Chen Long, China economist at Gavekal Dragonomics in Beijing, said this methodology implicitly assumes that an economic crash will eventually occur in China.

Mr Chen argues that credit losses are highly correlated with economic performance: bad loans rise when growth slows. If China can prevent a sharp downturn, credit losses will be much smaller, despite the extraordinary increase in leverage.

“If there’s an economic collapse, of course there will be massive credit losses. No one disagrees about that. But the issue is whether the collapse will actually happen. She takes that as a given,” he said.

He said Ms Chu failed to consider examples such as Korea in the 2000s or Japan after 1997, when debt rose strongly without harming growth.

Ms Chu acknowledges that an acute crisis does not appear imminent. Government influence over both borrowers and lenders has allowed Beijing to delay problems much longer than would be possible in a more market-driven system.

Beijing can order state-owned banks to keep lending to a lossmaking zombie company or to a smaller lender that relies on short-term interbank funding to stay liquid.

But Ms Chu said the ability to avoid recognising losses allows problems to fester for longer — and grow larger — than in an economy where actors respond purely to market incentives.

“What I’ve gotten a greater appreciation for is how everything is so orchestrated by the authorities,” she said. “The upside is that it creates stability. The downside is that it can create a problem of proportions that people would think is never possible. We’re moving into that territory.”



https://www.ft.com/content/3bc4da08-8171-11e7-a4ce-15b2513cb3ff

 

[Gregor Clegane]

$ 7.6 trillion.

 

[Beast]

$ 7.6 trillion.

Whatever that floats your boat.

 

[ashok321]

 

[Gregor Clegane]

Thread bump.

 

[faithfulguy]

View attachment 420465

Let's see how Indians would brag out of this one.