1/
They've said this many times before, Noah, but things have been getting consistently worse, not better. The amount of debt it takes to generate a unit of GDP has been growing rapidly, even as GDP growth has slowed, and within Beijing there is a fierce debate about whether...
They've said this many times before, Noah, but things have been getting consistently worse, not better. The amount of debt it takes to generate a unit of GDP has been growing rapidly, even as GDP growth has slowed, and within Beijing there is a fierce debate about whether...
https://twitter.com/Noahpinion/status/1305014850783834112
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or not they should take aggressive steps to get debt under control, even if this results in much slower growth and a rise in unemployment. Last year for example there was a big debate over whether to target 6% GDP growth or something much lower. If they did not think the...
or not they should take aggressive steps to get debt under control, even if this results in much slower growth and a rise in unemployment. Last year for example there was a big debate over whether to target 6% GDP growth or something much lower. If they did not think the...
3/
debt were a serious problem, and if they believed that Chinese growth was healthy, real and meaningful, why would they even bother having this debate?
The biggest disagreement I have with the Economist, I would say, is over their failure to understand the sources of...
debt were a serious problem, and if they believed that Chinese growth was healthy, real and meaningful, why would they even bother having this debate?
The biggest disagreement I have with the Economist, I would say, is over their failure to understand the sources of...
4/
Chinese debt and why the debt burden matters. They seem to think that the fact that China has avoided a financial crisis means that debt isn't that big of a problem, whereas I would argue that China was never likely to have a financial crisis, not because debt isn't a...
Chinese debt and why the debt burden matters. They seem to think that the fact that China has avoided a financial crisis means that debt isn't that big of a problem, whereas I would argue that China was never likely to have a financial crisis, not because debt isn't a...
5/
problem but rather because financial crises are balance-sheet events, and with its closed banking system and strong regulators, Beijing can restructure liabilities at will and so can quite easily prevent a balance-sheet crisis.
The real test is whether it is possible for...
problem but rather because financial crises are balance-sheet events, and with its closed banking system and strong regulators, Beijing can restructure liabilities at will and so can quite easily prevent a balance-sheet crisis.
The real test is whether it is possible for...
6/
China to maintain high growth rates without much faster growth in the debt that must fund huge amounts of non-productive investment. These two are related, of course, because if most debt goes to fund investment, and if the investment is productive, there is no way a...
China to maintain high growth rates without much faster growth in the debt that must fund huge amounts of non-productive investment. These two are related, of course, because if most debt goes to fund investment, and if the investment is productive, there is no way a...
7/
country's debt-to-GDP ratio can grow so rapidly and for so long.
But if anything is clear, it is that China simply cannot tolerate any slowdown in the growth in debt without suffering a very, very sharp slowdown in GDP growth. We know from the history of investment-driven...
country's debt-to-GDP ratio can grow so rapidly and for so long.
But if anything is clear, it is that China simply cannot tolerate any slowdown in the growth in debt without suffering a very, very sharp slowdown in GDP growth. We know from the history of investment-driven...
8/
growth "miracles" that the problem always arises once total debt stops growing faster than GDP. In that case the country either adjusts in the form of a crisis or in the form of "lost decades" of much slower growth, and a considerable part of that adjustment consists of...
growth "miracles" that the problem always arises once total debt stops growing faster than GDP. In that case the country either adjusts in the form of a crisis or in the form of "lost decades" of much slower growth, and a considerable part of that adjustment consists of...
9/
writing down years and years of misallocated investment that was capitalized when it should have been expensed (similar to what Galbraith referred to as the "bezzle").
That, by the way, is one of the main differences between growing debt in China and growing debt in...
writing down years and years of misallocated investment that was capitalized when it should have been expensed (similar to what Galbraith referred to as the "bezzle").
That, by the way, is one of the main differences between growing debt in China and growing debt in...
10/
the US, Europe and elsewhere. In the former case the expenditures are capitalized and show up as increases in wealth, but not in the latter cases.
We have no idea of how long China can sustain this growth in debt, but we also know that the longer it goes on, the more...
the US, Europe and elsewhere. In the former case the expenditures are capitalized and show up as increases in wealth, but not in the latter cases.
We have no idea of how long China can sustain this growth in debt, but we also know that the longer it goes on, the more...
11/
difficult the adjustment will be. Until then, nothing has really changed, in my opinion.
difficult the adjustment will be. Until then, nothing has really changed, in my opinion.
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