1/7
China Beige Book is worried because “small and medium-sized companies are borrowing a lot less than they were in the second quarter.” I’ve been asked if this means that Chinese debt is likely to grow less quickly this year than expected.
cnb.cx/30N9Uve
China Beige Book is worried because “small and medium-sized companies are borrowing a lot less than they were in the second quarter.” I’ve been asked if this means that Chinese debt is likely to grow less quickly this year than expected.
cnb.cx/30N9Uve
2/7
No, not if we consider debt systemically, rather than in terms of linear increments. If China Beige Book is right (and I expect they are), less borrowing by SMEs to invest in expanding production doesn’t mean less debt overall. It just means a shift in the locus of debt...
No, not if we consider debt systemically, rather than in terms of linear increments. If China Beige Book is right (and I expect they are), less borrowing by SMEs to invest in expanding production doesn’t mean less debt overall. It just means a shift in the locus of debt...
3/7
creation from SMEs to the state sector—and almost certainly a worsening of the debt burden.
This is because to the extent that China has a politically determined growth target that exceeds the real underlying growth of the economy (which I would guess is negative...
creation from SMEs to the state sector—and almost certainly a worsening of the debt burden.
This is because to the extent that China has a politically determined growth target that exceeds the real underlying growth of the economy (which I would guess is negative...
4/7
for 2020), the amount of state sector activity is effectively a residual that bridges the gap between real underlying growth in the economy and the targeted growth rate for economic activity. This means that less SME activity must be countered by an increase in...
for 2020), the amount of state sector activity is effectively a residual that bridges the gap between real underlying growth in the economy and the targeted growth rate for economic activity. This means that less SME activity must be countered by an increase in...
5/7
state-sector activity, which also means that less SME debt must result in more state-sector debt (the same is true for household debt, by the way).
Because SME investment is more likely to be productive than state-sector investment (mostly in excess infrastructure), this...
state-sector activity, which also means that less SME debt must result in more state-sector debt (the same is true for household debt, by the way).
Because SME investment is more likely to be productive than state-sector investment (mostly in excess infrastructure), this...
6/7
shift in borrowing from SMEs to the state sector also represents a widening gap between the growth in Chinese debt and the growth in the country’s real debt-servicing capacity. If China Beige Book is right, in other words, and SMEs are borrowing less, this won’t much...
shift in borrowing from SMEs to the state sector also represents a widening gap between the growth in Chinese debt and the growth in the country’s real debt-servicing capacity. If China Beige Book is right, in other words, and SMEs are borrowing less, this won’t much...
7/7
affect the total amount of outstanding Chinese debt, but it will worsen the real debt burden by shifting the use of the proceeds of debt from more to less productive investment activity.
affect the total amount of outstanding Chinese debt, but it will worsen the real debt burden by shifting the use of the proceeds of debt from more to less productive investment activity.
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