China collapse myth debunked
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Posted May 10, 2019, 2:51 AM UTC · edited
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Thanks for researching, writing, and sharing this. Much appreciated.
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Nice post. But how is China going to convince America that it can't afford to agree to all of Trump's trade demands if you keep spreading this?
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They secretly want to see 1.4 billions Chinese starve and China going into chaos so they can feel better about their miserable life
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It will keep growing until it's a giant Hong Kong then everyone will move there for work and complain about how racist we are.
LOL, not a bad future.
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The debt thing is over blown and might stem from insecurities of US debt. The interest rate would rise significantly if people actually thought there would be a debt crisis.
Mainland’s accounting numbers, however, have been fuzzy lately. If you apply benford and other numerical tests to the 180 or so countries in the IMF data base, and cluster them with non supervised learning, mainland china is clustered with not so credible countries. If you standardize all the test results and weight them equally and rank by the average, mainland china ranks 108 based on data from the last five years. It fell from a rank of 66 based on year t-10 to t-5. There is a prove why these numbers should follow benford.
The good news is that its not clustered with historical data of countries before a debt crisis. And country that do cluster with them do not necessarily have a debt crisis, they are almost always small african and south american failed states.
I hope they have better internal numbers.
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Yeah a lot of this is wrong that 300% is total debt including government, which is 47% on top of that you have private debt and provincial debt. Plus you have shadow banking debt. So yes there is a very large amount of debt and a downturn is coming after years of mal-investment. investment.
Plus there is a issues of equity be debt because of lot of the debt is in the private sector.
Yes the Anglosphere is going to face a downturn but so is China.
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It’s good you mention these points because they’re more examples of mainstream media voluntary dyslexia.
Nobody counts provincial debt in debt to GDP of the central government. The local debt problem in China is also insignificant. SCMP estimated it at 2.74 trillion this year... so 10% of GDP. In comparison, the US is at 2.5 trillion but that’s 15% of the US’s GDP.
On top of this, China’s foreign currency reserves are the largest in the world so any argument about debt crisis is immediately nonsense. China owns 3 trillion in foreign currency - that’s literally more than all the local debt in the whole country.
As for shadow banking that’s a dark sounding hyperbolic buzzword that means almost nothing to economists.
So yes there is a very large amount of debt and a downturn is coming after years of mal-investment. investment. Plus there is a issues of equity be debt because of lot of the debt is in the private sector.
Mal-investment? Is that how industrial profits averaged 4 trillion yuan a month last year? Every economy has bad investments, China is only different in the sense that there don’t seem to be as many. Bankruptcies “peaked” in China at around 7,000 filings last year - an alarming number! In the US it was 1.1 million.
This could just be because of legal differences or because of [insert dark, shady, shadow buzzword here], or it could just be because business is good? Among the bankruptcies, there was a 17-year span of no major corporate bankruptcies in China.
Every country has debt in the private sector so I don’t get the second part of this.
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Why are you only counting debt to gdp for the govt. Those numbers are total debt. Secondly who is nobody... Debt is debt it funded and serviced by tax whether it's govt or provincial both count...
Actual total liquid holding is about 2.2 trillion and that combined with total foreign assets is about 2.5 trillion.
Yes but what's the debt to equity of those companies profits have to compared with debt servicing
What's stopping mass bankrupticies is stealth qe in the form of massive liquidity injections. So the issues are on the bank balance sheets instead of corporate. Who are rolling over debt.
Lastly the bank equity vs their loans is levered 25-30:1 this is quite similar to what lehmann was pre crisis.
You're delusional of you think china isnt going to have a downturn of epic proportions.
So is the west but as will China
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Because western journalists pass TSF as government debt to GDP.
Debt is not funded by tax where did you get that idea. Almost all modern economists agree that currency is a government monopoly and the government prints currency as it pleases. Bonds and taxes are just ways to take money out of the economy and control inflation and have nothing to do with financial health**. It’s interesting you make this argument because you literally reference QE later in your post... a way to pay off debt without taxes.
** except in cases of independent central banks, the worst invention in modern history
QE is great and has never failed for the reasons stated under the Japan section. Modern economists are increasingly realizing this. In spite of alleged “stealth QE” inflation in China is only 2%.
China’s bank leverage is 15:1 not 30. But I guess being off by only 100% makes you 50% better than other China doomsayers.
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Servicing debt using helicopter money is nothing but charlatan theory. Might want to look at the work of Rogoff. Yes governments have been able to ever increase debt service by putting out new debts. And in bojs case buy debt using qe.
But as with all economic charlatanism it eventually leads to a downfall.
Also MMT has zero control of transmission mechanisms so this belief yiu can' willingly control the supply of money via these methods is ridiculous.
Actually all QE has done is lead to zombie economies and cooperation that's are on the edge of collapse and it won't work next time. So buying assets will be useless because the underlying productivity will fall part. It's already happening in Europe.
Economic charlatanism is coming to an end starting with Europe and China
Yeah it's not 15:1 Chinese banks have 40 trillion of assets not counting shadow banking vs 2 trillion in equity.
Lastly the majority of Chinese wealth is in real estate which is massively overpriced. Already the real estate industry is collapsing and when it goes down fully you'll see a massive wealth retrenchment leading to economic Fallout
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I love how people still believe this when this boy has cried wolf for the last 30 years and the wolf still hadn't come. People really believe what they want to believe