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"China is a country with a huge store of domestic savings and a still tightly controlled capital account. China doesn’t rely on foreign funding." 'nuff said.
by Iv 9y ago
"China is a country with a huge store of domestic savings and a still tightly controlled capital account. China doesn’t rely on foreign funding."
'nuff said.
- fhood 9y agoI think the point is that they rely on foreign lending to help fuel economic growth by flooding institutions with money, a practice that is unsustainable in the long term, and that their rating is being downgraded because their growth numbers are artificially inflated in this way.
- SubiculumCode 9y agoYou mean Chinese debt is held in their own currency?
- ryandamm 9y agoThis explains why there aren't external forces that can check the growth in credit. But there has been an explosion in debt within China, financing ultimately non-productive investment. Even with a positive external debt outlook, you can get wild economic imbalances within a country via uncontrolled credit creation. The hangover could be profound. To put it another way: why do you think centrally-planned economies are frequently outpaced by capitalist economies? Misallocation of resources. Debt binges are similarly distorting.
- AlexCoventry 9y agoWhat specific misallocation of resources are you referring to? The housing developments? I'm not convinced those are wasteful, yet, even if the developers go under.