China’s terrifying debt ratios poised to breeze past US levels

China’s terrifying debt ratios poised to breeze past US levels

The China-US sorpasso is looming. I do not mean the much-exaggerated moment when China’s GDP will overtake America's GDP – which may not happen in the lifetime of anybody reading this blog post – as China slows to more pedestrian growth rates (an objective of premier Li Keqiang.)

The sorpasso may instead be the ominous moment when China’s debt ratios overtake the arch-debtor itself.

I had presumed that this inflection point was still a very long way off, but a new report from Stephen Green at Standard Chartered argues that China’s aggregate debt level has reached 251 per cent of GDP, as of June.

This is up 20 percentage points of GDP since late 2013. The total is much higher than normal estimates, though it tallies with what I have heard privately from officials at the IMF and the BIS.

Mr Green – a highly-respected China veteran – includes total social financing (TSF), offshore cross-border bank borrowing (a story that we are going to hear a lot about), bond issuance, shadow banking of various kinds, and government debt.

The ratio has risen by 100 percentage points of GDP over the last five years.

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Emphasis added by me.

This one surprised me.. I know China has gotten caught on several occasions now by "cooking the books" however this article not only supports that accusation its apparently a lot worse than what was generally known.

I am curious how this could impact BRICS. I am also curious to see if this will have any impact on their plans in the South China sea. With a slowdown in their economy, a reduction in their construction projects internally and their push to gain control of pollution / smog / waste dumping into bodies of water, I think the Chinese economy is going to be a lot more volatile over the next years.

I also think that if China cannot gain some type of stability internally (where massive use of force is not used to achieve stability), the loss of some external markets are going to have more of an impact than what people think.

Should be interesting to see how this shakes out.

To put it into perspective -

It is the speed of the rise that worries credit rating agencies and regulators – including many at the Chinese central bank – as much as the volume itself. Though China is scary on both fronts. It has pushed debt to $26 trillion, more than the entire commercial banking systems of the US and Japan combined. The scale obviously has global ramifications.

What does this potentially mean for its s.e. asian neighbors, like the Philippines and say, Malaysia?

Ha ha China! Oh hang on, they buy all our iron ore.............

China has the worlds greatest industrial engine to support their debt whereas most others, only have the printing presses.

are you kidding me ,i can buy anything from china and at less then half the price as it costs from the u.s.a,long live china and their more then fair prices,keep your over priced over rated american merchandise im buying chinese all the way,china is my friend and so is ebay,go look you guys are ripping the world and its you in debt ..and china buys your debt so you should bow and say thank you

originally posted by: Xcathdra
The sorpasso may instead be the ominous moment when China’s debt ratios overtake the arch-debtor itself.

I have no idea what this means. Anyone?

originally posted by: stuthealien
are you kidding me ,i can buy anything from china and at less then half the price as it costs from the u.s.a,long live china and their more then fair prices,keep your over priced over rated american merchandise im buying chinese all the way,china is my friend and so is ebay,go look you guys are ripping the world and its you in debt ..and china buys your debt so you should bow and say thank you

And I am sure you are one of those people that thinks minimum wage is to low.. Evil corporations rule the world and China is saving the common man..

This is nothing more than an opinion piece by a guy that likes to talk about economics and finance....but who's job seems to be to sell financial doom.

Anyone that has looked in to the situation in China knows that they have a beast of an economy going over there. They have millionaires popping up left and right and their human rights violations are nothing compared to what it used to be.

So I would not take this seriously.

China has some real economic problems coming as they will have transition from and low wage manufaturing ecomomy to a modern service based. Why does this have to happen because wages in China will rise and keep on rising until low priced labor can not longer be the basis of it economy. We saw this in Japan as well. That is going to be a big challenge.

Debt however is not a problem. It is a political hot potatoe that people like to toss around but, in reality all companies operate with debt. The US or China borrow money to build a highway that connects to cities. As time passes that highway leads to more trade, more jobs, higher wages, and all that means more tax income which overtime more than pays for the debt they went into when building the highway.

I mean the reality of it is the US could just sell a small portion of its mineral rights and pay off its debt. It however is not required by law to do so. China is in the position. When countries go into debt none of their assets are up for grabs unlike when people or companies do so.