First, the primary focus of the headline and story just out. (or to put it another way, the breaking headline that started my hunt)
The global lender, in its latest East Asia and Pacific Update, cut its gross domestic product (GDP) growth projection for China by 0.1 percentage
point to 8.3 percent for 2013, citing Beijing's ongoing efforts to restructure its economy.
Now in some ways, I say 'Cry me a river, guys'. We'd kill and mortgage the Treasury for that growth rate ..then I realized that well, we literally
ARE mortgaging the US Treasury to attempt precisely that. Hmm... A bit more reading and my smirk dropped pretty quick. This has more serious
implications for what Reuters is reporting here.
The World Bank, however, tempered its more benign outlook about conditions in the West with a call for Asian governments to start reining in the
supportive monetary and fiscal policies that had been adopted in the aftermath of the financial crisis, echoing concerns raised by the Asian
Development Bank last week.
Now that doesn't sound good.....but, that isn't what dropped all pretense of a rather tongue in cheek approach I'd first thought to take on this.
No, there is another item which froze my fingers and then made me select-all, delete and start over again.
The Bank of Japan on April 4 stunned markets by unveiling an unprecedented monetary expansion campaign with plans to inject about $1.4 trillion
into the economy over two years to break a deflationary cycle and end two decades of stagnation. The unprecedented easing provided fresh momentum to
yen bears, with the dollar tapping a four-year high of 99.95 yen on Thursday.
This is a thread where reading the linked stories is important to get the context of how it's linked and inter-related. Here is another source with a
bit more on Japan's corner of the Asian picture as it's shaping up.
Japan's central bank has promised to unleash a massive programme of quantitative easing – worth $1.4tn (£923bn) that will double the
country's money supply – in a drastic bid to restore the economy to health and banish the deflation that has dogged the country for more than a
As part of a new set of policies known as Abenomics, formulated by Japan's new prime minister Shinzo Abe, the Bank of Japan will buy ¥7tn yen
(£46bn) of government bonds each month using electronically created money, with the aim of rekindling demand and pushing up prices and
^^ That comes from 10 days ago and explains what the first one is talking about. People have been asking what, with all the crisis going on, might we
have been missing? I'm going to say A LOT would be a fair answer. DOUBLING
the money supply?!
That's still not all in looking for material for this story. How did all this get missed? Oh yeah... We're all looking at North Korea and maybe
Syria in our free time.
While Japan is going into new pits of debt (much like us, and Japan was already
#2 for World Debtor Nation
), China is going the opposite direction with
what could be equal end results. Actually, equal to Europe more than the U.S..
What should become obvious is that in order to maintain its unprecedented (if declining) growth rate, China has to inject ever greater amounts of
credit into its economy, amounts which will push its total credit pile ever higher into the stratosphere, until one day it pulls a Europe and finds
itself in a situation where there are no further encumberable assets (for secured loans), and where ever-deteriorating cash flows are no longer
sufficient to satisfy the interest payments on unsecured debt, leading to what the Chinese government has been desperate to avoid: mass corporate
Finally, to help tie this all together and give a complete picture? The last part I had really been missing.
The implosion of Suntech Power Holdings and China's decision to split the Ministry of Railways (MoR) and transfer all its debt to a state owned
enterprise have once again raised questions about government debt.
We have previously reported on how local governments were underplaying the bad debt problem and actually making it worse by plying "zombie
companies" with more cash.
(Source: Business Insider
Ummm... HUH?! I dug one more step and I wish I hadn't now.
China’s unsustainable corporate debt to GDP ratio is the highest in the world, and experts conclude that all three signs portending financial
crisis have already appeared.
China has the largest credit bubble in the world, in the form of corporate held bonds and short term loans, analysts say. Beijing-based magazine
Caijing reports that China’s corporate debt to GDP ratio reached 151 percent, citing research by Zero Hedge analysts.
This figure is doubted by some, but other analysts present a similar conclusion. China’s total corporate debt amounted to 108 percent of the GDP in
2011, rising to 122 percent of the GDP in 2012, a 15-year high, says GK Dragonomics in a November 2012 economic analysis published in Bloomberg
Business Week, titled “Corporate China’s Black Hole of Debt.”Even research by Chinese experts reaches comparable conclusions.
The link a bit above this showing Japan's Debtor nation status at the bottom of the linked page also shows China as being relatively healthy for
debt. It shows them with solid reserves, unlike us, and generally doing alright with all things considered. So you can imagine my shock
that something HUGE had been left out of that number. The Corp/Short term debt.
In China, it's not like the United States (As reading the articles explains and T&C for quoted material won't let me go much further with here).
China owns part of every corporation and with that, links into it's problems as well. It's the part where Chinese Communism meshes with the new
Chinese Capitalism and ...Oh goodness...they did get the worst of both worlds didn't they?
I've thought China was a stable nation, monetarily and facing no HUGE pending crisis like Europe and the United States. It would seem that we've all
missed quite a bit, after all.
Thoughts? Additional information? I'm still digesting all this. It's quite a shock to realize THE WHOLE WORLD
truly is in the same sinking
boat. Russia looks comfy on numbers, but you know? Until this story? So did China. I wonder what lurks in Russia Financial Closet??
Welcome to the New World?