On 2013-08-19, at 5:30 PM, raghu wrote: > On Mon, Aug 19, 2013 at 4:12 PM, Marv Gandall <[email protected]> wrote: > Most debt in China is held by the central and local governments and > state-owned companies, and the central bank and > > > This is a completely new argument, one that has nothing to do with the > Economist article that started this thread. > > This is really a two-part argument: (a) a lot of Chinese debt is just > obligations of one government entity to another, and (b) therefore high > levels of debt is not really a problem. > > I don't see why (b) follows from (a). > -raghu.
Let me turn the question around: When do high debt levels of a sovereign government awash in foreign currency reserves become a problem? Since the debunking of Rogoff and Reinhart, the subject has become a matter of wider controversy extending beyond the academy. In China, there's no reason to believe the PPOC and Ministry of Finance would not, if necessary, bail out the large state-owned banks and companies as they previously did in 1997 and 2009. They have the monetary and fiscal firepower to do so with little effect on the yuan. The savings rate in China is much higher than in the West, and workers are not nearly as indebted. The overcapacity is mostly in the export zones on the coast but there is ample room for development in the central and western provinces, as the continued strong flows of FDI into China would seem to illustrate. I'm more persuaded by the camp which thinks China is going through a typical cyclical slowdown fostered by government policy than by the sma! ller number of commentators who think it is going the way of Japan. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
