This is actually a much more complex, nuanced, and layered question with similar answers in my opinion, so as I'm watching football, let me give you a short thread on this. 1/n
First, within China, I would say government and most businesses of any size (mostly state linked) have incredibly high risk tolerances. Much much higher than anything comparable in the US. This is both positive and negative. Positive in that there is more willingness 2/n
to take risk and be bold. Negative in the sense that because they all expect to be bailed out explicitly or implicitly, there is zero concept of risk management. Throw money around like a Russian billionaire before going into see Putin, worry about the rest tomorrow. 3/n
I have honestly never seen businesses or government just not care about potential downsides the way they do in China. They Do. NOT. Care. Second, conversely, despite attempts, the willingness to take personal risk, say start a business is incredibly incredibly low 4/n
Most kids out of college and even graduate school will take lower paying jobs (by like 75-90% less) at SOE's than work at Goldmans because once you move on, nobody in China care's about GS, but joining an SOE and the Party cell: that's China finance street cred. 5/n
The businesses that get started primarily get started with a major state linked enterprise or something similar as the primary client with hopes to expand from there. Where Chinese will accept enormous personal risk is real estate. On the ground stories make pre-2008 US 6/n
look like risk averse scardy cats. The logic goes that everyone else is doing it so they will never let the market fall and if something happens they can't catch all of us. It makes some perverted sense. Without going into all the ways this explains the observed behavior 7/n
These two layers of risk acceptance do explain I think most of what we see. OBOR, tech, real estate, debt, go on and on, why people and institutions accept the risk they accept in China I think is explained by these different overlapping and contradictory effects. Done.
