How much debt China can bear?

[medulla]

---

---

How much debt China can bear? - Finance & Markets - morningwhistle

Credit can stimulate economic growth; a rising economy encourages more borrowing. With China’s economy certainly showing signs of slowing, maybe it’s time for the dragon to think about how to deleverage.

The debt burden piled up during the global economic crisis does pose a risk. As Tom Orlik at the Wall Street Journal writes:

The ratio of credit to gross domestic product ballooned from about 134% in 2008 to 173% at the end of 2011. That helped save China's economy from the worst of the global financial crisis. But it also brought its own problems—inflation, a real-estate bubble, and the risk of bad loans in the banks. Now the trend is unwinding.

Chinese experts also see a problem “extremely” high corporate debt ratios pose.

Li Yang, deputy head of the Chinese Academy of Social Sciences, a government think tank, told the official China Daily the nation’s China's total debt to GDP ratio is 168.9 percent, a "healthy" figure considering that the global average is 200 percent, and is 500 percent in some large economies.

"But debt among enterprises amounts to 105.4 percent of GDP, which is the highest compared with other countries such as the United States and Japan, "Li said, adding the figure far exceeds the generally accepted safety ceiling of 80 percent.

Rising capital cost have also diminished enterprises’ profits, putting a strain on the real economy, according to Orlik:

Total interest expense for China's corporate sector was up 41% year-on-year in the first quarter. Meanwhile, the average return on invested capital for mainland-listed firms fell to 6.7% in 2011 from 11.6% in 2007, according to numbers from Chinese data provider Wind. With the benchmark one-year lending rate currently at 6.6%, the smart choice for many firms is not to borrow.

Small and medium-sized enterprises are the main source of employment and a main driver of economic growth. If they really stall, problems can amplify.

Unlike its Western counterparts, the Chinese government can take advantage of centralized state power and has ample room to deleverage, Orlik argues:

The government has options for responding. It could further lower the reserve requirement ratio, which would encourage firms to take on more loans as it lowers the cost of capital and signals that the government intends to keep demand on track—buoying confidence about future orders and profitability.

A further step would be to relax the floor on lending interest rates. China's banks are currently allowed to lend at a discount of up to 10% to the government-set benchmark. People's Bank of China governor Zhou Xiaochuan said in April that the next step in interest rate reform could be liberalizing the lending rate—suggesting the floor could be lowered.

Beijingalso has room to ratchet up its own spending. There are signs that this is already underway. Investment funded from the state budget grew 29% year-on-year in the first four months of this year, partially offsetting a meager 4.2% increase for investment financed by bank lending.

[Chinese-Dragon]

India's external debt is actually BIGGER than their currency reserves.

Whereas China's currency reserves alone are bigger than India's entire economy, at $3.2 trillion.

And for reference, here are the official IMF figures:

China debt-to-GDP ratio - 26%
Argentina debt-to-GDP ratio - 44%
Malaysia debt-to-GDP ratio - 53%
Pakistan debt-to-GDP ratio - 60%
India debt-to-GDP ratio - 63%

List of countries by public debt - Wikipedia, the free encyclopedia

[illusion8]

China's debt-GDP ratio hits 43 percent: ICBC

China's debt-GDP ratio hits 43 percent: ICBC - Xinhua | English.news.cn

[karan21]

freaking ponzi scheme. they hide their debt under state govts and central govt has no debt at all. loll an economy of 6 tril and debt only 16%

i am not gonaa argue with this chini dragon as he knows the reality but will try his best to hide it, infact calling india a ponzi scheme.

China's debt-GDP ratio hits 43 percent: ICBC

China's debt-GDP ratio hits 43 percent: ICBC - Xinhua | English.news.cn

nop thats just central, its close to 160% overall and if u add the debt of spv idk maybe 200%, this is the view of the 90% of economists and bilionares around the world.

[Chinese-Dragon]

freaking ponzi scheme. they hide their debt under state govts and central govt has no debt at all. loll an economy of 6 tril and debt only 16%

i am not gonaa argue with this chini dragon as he knows the reality but will try his best to hide it, infact calling india a ponzi scheme.

Yes, clearly the IMF is Chinese propaganda.

The IMF also says that India's GDP ranking fell two places from 2010 to 2011, overtaken by both Canada and Russia.

[DelhiDareDevil]

India's external debt is actually BIGGER than their currency reserves.

Whereas China's currency reserves alone are bigger than India's entire economy, at $3.2 trillion.

And for reference, here are the official IMF figures:

China debt-to-GDP ratio - 26%
Argentina debt-to-GDP ratio - 44%
Malaysia debt-to-GDP ratio - 53%
Pakistan debt-to-GDP ratio - 60%
India debt-to-GDP ratio - 63%

List of countries by public debt - Wikipedia, the free encyclopedia

Why do Chinese only want to use Wikipedia, when it suits them?

And then laugh at the unreliable source when someone else uses it against them?

[Chinese-Dragon]

Why do Chinese only want to use Wikipedia, when it suits them?

And then laugh at the unreliable source when someone else uses it against them?

Those numbers are quoted from the IMF, check the link yourself.

[illusion8]

freaking ponzi scheme. they hide their debt under state govts and central govt has no debt at all. loll an economy of 6 tril and debt only 16%

i am not gonaa argue with this chini dragon as he knows the reality but will try his best to hide it, infact calling india a ponzi scheme.



nop thats just central, its close to 160% overall and if u add the debt of spv idk maybe 200%, this is the view of the 90% of economists and bilionares around the world.

That's Xinhua for you - always the BS, it actually was 150% in 2009.

[karan21]

Yes, clearly the IMF is Chinese propaganda.

The IMF also says that India's GDP ranking fell two places from 2010 to 2011, overtaken by both Canada and Russia.

just listen to him and aull get ur ans and btw india didnt fall down 2 ranks it depends on currency value and also the time or qaurter at which estimates are taken.

[Chinese-Dragon]

I guess we fooled not only the IMF, but S&P as well.

Since S&P downgraded INDIA, not China.

Based on India's huge debt burden, their enormous trade deficit and huge budget deficit, as well as extreme policy paralysis.

[DelhiDareDevil]

Those numbers are quoted from the IMF, check the link yourself.

Just like all wikepedia information.

[illusion8]

China's Ponzi scheme economy.

China is no exception. The common wisdom is that China runs a very low debt-to-GDP ratio of around 30 per cent (this ratio was in the low 20s till 2007 but jumped sharply during the 2008 crisis), which gives it lots of firepower to keep reflating the economy and to keep recapitalising its banks. The reality is that this ratio is plain wrong. China’s growth model is based on the oldest rapid economic growth hormone available: debt.

China has debt at various levels and pockets. Let’s add to this central debt, the local government and provincial debt figures. This figure is around $1.9 trillion. Let’s further add the obligations of the Ministry of Railways. That’s $360 billion. And finally let’s also add 80 per cent of outstanding bank credit. This adds $6.3 trillion. We add bank loans to national debt because unlike most countries, China uses banks for nearly all of its directed, policy lending programmes. For example, the stimulus of 2008-09 was financed largely by banks. By pushing its lending via the banks’ balance sheets, China creates the impression of a country that has very low budget deficits and, of course, very low central debt. We take 80 per cent of bank debt into the national debt figures under the assumption that 20 per cent goes towards consumer and private sector credit.

[karan21]

China's Ponzi scheme economy.

China is no exception. The common wisdom is that China runs a very low debt-to-GDP ratio of around 30 per cent (this ratio was in the low 20s till 2007 but jumped sharply during the 2008 crisis), which gives it lots of firepower to keep reflating the economy and to keep recapitalising its banks. The reality is that this ratio is plain wrong. China’s growth model is based on the oldest rapid economic growth hormone available: debt.

China has debt at various levels and pockets. Let’s add to this central debt, the local government and provincial debt figures. This figure is around $1.9 trillion. Let’s further add the obligations of the Ministry of Railways. That’s $360 billion. And finally let’s also add 80 per cent of outstanding bank credit. This adds $6.3 trillion. We add bank loans to national debt because unlike most countries, China uses banks for nearly all of its directed, policy lending programmes. For example, the stimulus of 2008-09 was financed largely by banks. By pushing its lending via the banks’ balance sheets, China creates the impression of a country that has very low budget deficits and, of course, very low central debt. We take 80 per cent of bank debt into the national debt figures under the assumption that 20 per cent goes towards consumer and private sector credit.

all economies are ponzi but china is just too big. their debt is all over the place. can any chinese show me any article saying indian economy iis ponzi like they way they shout here... i can show 100000000000000

the dragon has departed back to his den.

[illusion8]

all economies are ponzi but china is just too big. their debt is all over the place. can any chinese show me any article saying indian economy iis ponzi like they way they shout here... i can show 100000000000000

the dragon has departed back to his den.

Thats an open invitation to all their trolls...watch out .

[northeast]

---

---

lol，China has unlimited RMB and 3.2 trillion dollars.
Debt is the last thing we should care.
Stop closing eyes to your own mess and stop bashing china，it would only hurt yourselves.