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China's Debt Problem Worse than Portugal

Discussion in 'Chinese Defence Forum' started by DALAI LAMA 4477, Nov 13, 2011.

  1. DALAI LAMA 4477


    New Recruit

    Sep 25, 2011
    +0 / 19 / -0
    Government officials in China, the largest foreign holder of U.S. debt, have been chastising the U.S. over Standard & Poor’s downgrade to AA+.

    Guan Jianzhong, chairman of Dagong Global Credit Rating, has said the U.S. dollar is “gradually [being] discarded by the world,” and the “process will be irreversible.”

    But China’s debt-to-GDP ratio is worse than the United States’ ratio. It is worse than insolvent Portugal, which is now relying heavily on the European Central Bank for help, and had to go to the International Monetary Fund to get a financial bailout.

    The U.S.’s new AA+ rating from Standard & Poor’s is still higher than the one assigned to the Middle Kingdom. S&P has China’s debt rating stuck at AA-, the fourth highest level, due to its “sizable” contingent liabilities in its banking system.

    China’s own system is jammed with rotten debt held in off-balance sheet state enterprises. Its countryside is littered with eerie, empty ghost towns. And Moody’s Investors Service says last month that China’s local debt was understated by hundreds of billions of dollars.

    Despite that, the People's Daily said S&P’s downgrade of the U.S.'s credit rating "sounded the alarm bell for the dollar-denominated global monetary system.” China owns an estimated $1.16 trillion in U.S. debt. China prints yuan to hold down its value so as to keep its exports dirt cheap. It then uses that extra printed currency to buy U.S. debt.

    Here are estimates to keep handy as this debate rolls along:

    *China’s debt-to-GDP higher than Portugal’s ratio: China likes to say its debt-to-GDP ratio is 17%. Not so fast. The respected Beijing-based research firm Dragonomics says it is 89% of GDP, worse than Portugal’s 83% of GDP, and the U.S.’s 79% by 2015. Stephen Green, China economist at Standard Chartered Bank, figures China’s total debt, including contingent liabilities, is 77% of GDP. China’s balance sheet is notoriously murky.

    *China's local government debt understated: It may be 3.5 trillion yuan ($540 billion), bigger than its state auditor has estimated, Moody's said last month.

    Moody's said it discovered more potential loans after it found discrepancies in figures given to it by Chinese authorities. China's central bank alone holds an estimated $1.16 trillion in debt, and the government has already increased credit in the system to a reported 200% of GDP.

    Mansoor Mohi-uddin, managing director of foreign exchange strategy at UBS, had this to say about why the dollar will continue to keep its reserve status in the world markets:

    * US Treasury market’s depth and liquidity was why it was the one large financial market to function smoothly during the global financial crisis of 2008. And even throughout the debt ceiling and downgrade crisis, U.S. ten-year yields remain at historic lows, 2.6%.

    *Foreign currency markets are either illiquid, unstable or not transparent to accommodate central bank reserve flows. The eurozone’s problems have kept the euro on dubious footing, with the European Central Bank shouldering the burden of keeping it strong by raising interest rates. Japan’s massive debts, the largest in the world, have kept the yen on unsound footing. Swiss debt markets are tiny. And the Chinese government’s tight, protectionist capital controls hinder inflows to the renminbi.

    *U.S. has solid political relations with most of the planet’s largest foreign reserve-holding countries. That keeps the dollar on sound footing, too. Those countries are Japan, South Korea, Saudi Arabia, Kuwait, Qatar and the United Arab Emirates.

    *Strong U.S. defense gives these countries shelter, making it in their interests to protect the dollar, and their own holding, in the global currency markets.

    *U.S. has flexible monetary policy: True, this upsets monetary hard-liners who detest the Federal Reserve’s quantitative easing policies that has blown out its balance sheet to a seventh of the U.S. economy. But the U.S. central bank for now can still set monetary policy independently, unlike central banks overseas. It’s increasingly being drawn into political fights however. However, individual eurozone countries can’t do much on their own to alter the course of the euro to support their own economies, and they can’t set interest rates or pursue separate exchange rate policies to support their economies.

    China's Debt Problem Worse than Portugal | Fox Business
  2. Chinese-Dragon

    Chinese-Dragon PDF THINK TANK: ANALYST

    Jul 9, 2010
    +52 / 70,862 / -0
    Fox news. :rofl:

    And our debt-to-GDP ratio is 17%. :azn:

    But some people say, well since China's system isn't transparent, it must be several multiples higher!

    This is called an "Argument from ignorance". The proper response to not having the correct data is to say "I don't know", not simply guessing based on a wide range of estimation procedures.
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  3. AerospaceEngineer

    AerospaceEngineer BANNED

    Jan 12, 2011
    +0 / 442 / -0

    indian fart:bad:
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  4. isro2222

    isro2222 FULL MEMBER

    Nov 17, 2011
    +0 / 1,526 / -5
  5. china hyperpower

    china hyperpower BANNED

    Nov 8, 2011
    +0 / 120 / -0

    an indian or westerner telling china about debt is the definition of the pot calling the kettle black.

    india has a federal debt of 71% and its deficit is around 10% every year. it has one of the largest current account deficits(1op 10 worst).
    india is still a debtor country, china is the largest creditor nation in the world.

    indians just cannot handle the fact that india is not even talked about when westerners want money.
    poor little indians are forever behind china.
  6. china hyperpower

    china hyperpower BANNED

    Nov 8, 2011
    +0 / 120 / -0

    this comment shows how not a single indian understand basic economics.
    no wonder india is in so much debt.

    china giving money to america means its a creditor nation, meaning its got spare money to lend, ur whole point is invalited by that comment. lol. only an indians could come up with that.

    spending on infrastructure is with money china has earned, not going into debt, thats why china dont go into massive deficits like the clueless indians. china can spend its wealth, india has to borrow to spend. thats the difference between being a creditor and a debtor.

    LOL what bailout?
    its not called a bailout u fool, its called a stimulus package to fight off the global financial crisis.
    it was once in a lifetime event, when the entire world financial system collapsed after lehman brothers collapsed.
    that was done with money china has, the money not lent to america was reinvented into the stimulus.

    u indians should just stick to playing cricket, leave the economics bit to people that understand it.

    and if u indians could ever dream to get ahead of china, maybe u should stop going into debt and become a creditor nation like china.
    of course thats not going to happen because india's destiny is to be behind china.
    god made it that way.