Originally posted by Johnze
reply to post by MrXYZ
Well the IMF estimated China public debt to GDP at around 20% last year. How has this quadrupled in less than a year?
Something else you have bear in mind also about Chinese debt, it is solely in Chinese currency, which as it happens is wholly controlled by the
government and I seriously doubt the Chinese state is going to force a run on themselves. One happy quirk of state ran banking.
The way they assess debt in China (and what the IMF basically repeated without thinking) is flawed as it ignores local government debt. It didn't
quadruple in less than a year, they just didn't account for the majority of it. Just like the US changes the way they assess inflation rates every
time something bad happens. They leave out stuff (like housing) on purpose to "tweak" the results to their liking.
China also doesn't include a lot of results from STATE OWNED companies. Over 80% of state owned companies have debt to asset ratios of above 90%!! If
you know anything about economics, you know what happens once growth slows...they will all have to default or be bailed out, like in the US.
Here are more details about it:
And the debt isn't only Chinese currency, they borrow money too from other governments. And even if it only were Chinese currency, it would STILL
trash their economy...just like a US default would crush the US economy.
You know what the scary thing is? Not that many people talk about it, definitely not in China. Why not? Because they know if people also start getting
worried about China, the entire world will enter a very very long recession, even worse than what we're seeing now. The Western economies can't take
more bad news from another front.
How can you exploit that?
China's only way out right now is spending a ton to keep the economy growing at the rate it currently is, at least long enough until the West
recovers. They're already failing a bit as growth is slowing...mostly because their largest buyer markets (the west) are pretty much broke. By
artificially stimulating the economy like that, they will have some spectacular growth rates in the short to medium term...so invest in China. But at
the slightest sign of trouble you should run for the hills and hedge your investments. Why? Because China won't come out with any really bad news
until it's too late. They will try to suppress this as long as they possibly can. They KNOW they need growth to keep the house of cards
standing...bad news would demolish it.
China has one advantage though, a growing middle class who might start spending more now that the west can't afford it any longer. They can fill that
In the US, the middle class has been systematically robbed for over 40 years. The massive redistribution of wealth to the top 1% and richest
corporations now bites them in the ass. The very people who could stimulate the economy buy spending more, can't. The MAJORITY doesn't have the
money to stimulate the economy through consumption like in the past, and the richest people invest where returns are currently greatest...in Asia, and
NOT in the US!