Debt is a ticking-time bomb for the Chinese economy. In the past three years central government stopped local governments from financing through investment vehicles and set a cap for the issuance of bonds. But new forms of debt continue to be formed. Local officials appear not to care about borrowing more, as long as the money can be used in projects that may translate to political achievements. And with those achievements, officials will be promoted to a higher level–as will the debt burden. A more worrisome thought will be: can those additional government debts and investments support China’s long-term growth?
China’s economic growth over the past few decades has impressed the world. But the world’s second largest economy now faces a difficult transformation: from relying on exports and investments to developing domestic demand. That’s not easy. Government-led stimulus is only a temporary solution and only looked reasonable in the first few years after the recent global financial crisis. In fact, the main problem facing the Chinese economy has been the weak demand in domestic market which manifested clearly in 2006, and became more obvious when growth slowed down.
Slow growth in the Chinese economy will put pressure on local governments’ ability to repay their debts.
Big data has made its way to China and has been eagerly adopted by the countryʼs tech giants. Does it stand to revolutionize business?
This week, all eyes were on the Chinese economy growth figures, the lowest since 2009; and and Tesla stunned company watchers by opening a store on Tmall.
This week, China’s exports and imports data showed robust growth despite forecasts that were less rosy; and Alibaba’s financial arm Alipay got a makeover.
Local government debt in China is spinning out of control. A look at the most indebted cities in China and the size of their debts. Nearly everyone agrees that China has a serious local debt problem, some would even call it a crisis, one which the State Council addressed in a highly anticipated report released last summer. […]
You are invited to download the March 2014 issue of CKGSB Magazine. You’ll enjoy articles and interviews like: COVER STORY The Money Matrix: As Chinese consumers show an increasing preference for easy-to-use internet finance, what will happen to traditional banks? SNAPSHOT: China’s Crushing Debt: How serious is China’s local debt problem? A look at the ticking time bomb. […]