3 ms·
China is impervious to any amount of debt and should let it all default right away. Normally if you are heavily in debt say you have a bad credit score, no one
by gscott 11y ago
China is impervious to any amount of debt and should let it all default right away. Normally if you are heavily in debt say you have a bad credit score, no one will want to lend to you. However if you have a bad credit score and millions of people moving from poverty to the middle class and companies around the world want to sell to them... that is a different story altogether. It is not like there is another market like China available. China is the only growth market available, anywhere. Companies are so desperate to sell in China they have transferred all of their intellectual property to companies inside of China for the privilege even though it will destroy the companies in the long run.
- pil4rin 11y agoYou wouldn't consider India or many parts of Africa a growth market?
- gscott 11y agoNo, right now India doesn't have a growth mindset because of their many laws and probably corruption. Africa is not stable enough for meaningful growth however... China is doing their best to change that and make Africa a growth market for them by working with stable dictators no matter how brutal and terrible they are.
- cylinder 11y agoMichael Pettis explains why China almost certainly has to undergo debt forgiveness, just as pretty much every other heavily indebted nation has, historically: http://blog.mpettis.com/2016/01/will-chinas-new-supply-side-reforms-help-china/ http://blog.mpettis.com/2016/01/will-chinas-new-supply-side-...
- coliveira 11y agoThis is probably what China should do, but like any other nation in the world they will not do because of the high political cost. The most likely scenario for China is that they will maintain this debt forever, by constantly devaluing the currency just to let the state-owned companies survive.