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This story masks BAD news. http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable/ http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable... China

by rrggrr 11y ago

This story masks BAD news. http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable/ http://blog.mpettis.com/2015/11/chinas-rebalancing-timetable... China's debt today is over 200% of its GDP and may exceed 300% in five years. One hopes the IMF and China agreed on concessions will assist China in rebalancing its economy quickly, because as Petits' posting points out -- a disruptive end is near for the current model.

narrator 11y ago
My comments on this previously: https://news.ycombinator.com/item?id=10601219 https://news.ycombinator.com/item?id=10601219 TL;DR China's financial system is partially privatized central planning so it follow different patterns than the Western financial system.
AReallyGoodName 11y ago
Where are the sources for any of the claimed figures in the article? It doesn't have one single link to any of the claimed figures and a quick Google shows the claimed figures to be at least an order of magnitude out.
fspeech 11y ago
Internal debt is also internal asset, which net out to zero. China is a net international creditor. Its internal debt structure may have implications for its economoic future, but is not nearly as relevant as its current account balance for foreign holders of RMB.
- rrggrr 11y ago
  Internal debt is not an asset because the debt holders are SOE's, provincial governments and companies too big too fail. Therefore the largest share of debt is public debt, and work must be done to raise incomes throughout China so that debt can be serviced by taxes on a healthy private sector.
  - beachstartup 11y ago
    i think previous commenter was referring to the balance sheet definition of debt, which is Assets = Liabilities + Equity
throwaway4633 11y ago
Debt doesn't really matter when it's your own currency for your own country. For example, imagine you control a cult of 50 people and invent a currency (cultcoin). You can create a debt of 10 billion cultcoins and it won't affect the real wealth of the residents. What really matters more is the exports and imports to the outside world, and the value produced by the residents.
- rrggrr 11y ago
  No. What matters is the ability of the majority of people to have decent jobs, such that the State can maintain economic and social stability. The ineffecincies huge debt driven growth create make stability long term impossible.
- tmlee 11y ago
  When debt is created, wealth is being transferred from the residents to the government. If the government fails to use the debt created to stimulate the economy in the long term, the impact will trickle down and the residents will find themselves poorer and not being able to be competitive enough for the outside world to demand their goods.
- digi_owl 11y ago
  This depends on you talking about national debt or private debt. For national debt, the dynamic you describe holds true. But for private (households, companies) debt it does not as they do not have the capacity to create new money.

by rrggrr 11y ago

narrator 11y ago

My comments on this previously: https://news.ycombinator.com/item?id=10601219 https://news.ycombinator.com/item?id=10601219 TL;DR China's financial system is partially privatized central planning so it follow different patterns than the Western financial system.

AReallyGoodName 11y ago

Where are the sources for any of the claimed figures in the article? It doesn't have one single link to any of the claimed figures and a quick Google shows the claimed figures to be at least an order of magnitude out.

fspeech 11y ago

Internal debt is also internal asset, which net out to zero. China is a net international creditor. Its internal debt structure may have implications for its economoic future, but is not nearly as relevant as its current account balance for foreign holders of RMB.

rrggrr 11y ago
Internal debt is not an asset because the debt holders are SOE's, provincial governments and companies too big too fail. Therefore the largest share of debt is public debt, and work must be done to raise incomes throughout China so that debt can be serviced by taxes on a healthy private sector.
- beachstartup 11y ago
  i think previous commenter was referring to the balance sheet definition of debt, which is Assets = Liabilities + Equity

throwaway4633 11y ago

Debt doesn't really matter when it's your own currency for your own country. For example, imagine you control a cult of 50 people and invent a currency (cultcoin). You can create a debt of 10 billion cultcoins and it won't affect the real wealth of the residents. What really matters more is the exports and imports to the outside world, and the value produced by the residents.

rrggrr 11y ago
No. What matters is the ability of the majority of people to have decent jobs, such that the State can maintain economic and social stability. The ineffecincies huge debt driven growth create make stability long term impossible.
tmlee 11y ago
When debt is created, wealth is being transferred from the residents to the government. If the government fails to use the debt created to stimulate the economy in the long term, the impact will trickle down and the residents will find themselves poorer and not being able to be competitive enough for the outside world to demand their goods.
digi_owl 11y ago
This depends on you talking about national debt or private debt. For national debt, the dynamic you describe holds true. But for private (households, companies) debt it does not as they do not have the capacity to create new money.