Friday, May 20, 2016

Ambrose Evans-Pritchard:
China's Communist Party Goes The Way 
Of The Qing Dynasty As Debt Hits Limit
Article highlights China's massive debt level which is now approaching $30 Trillion - "The fresh credit alone created since the financial crisis is greater than the outstanding liabilities of the U.S., Japanese, German, and Indian commercial banking systems combined. Moody's warned this month that China's state-owned entities (SOEs) have alone racked up debts of 115% of GDP, and a fifth may require restructuring. The defaults are already spreading up the ladder from local SOE's to the bigger state behemoths, once thought - wrongly - to have a sovereign guarantee. To put matters in context, leverage rose by roughly 50 percentage points of GDP in Japan before the Nikkei bubble burst in 1990, or in Korea before the East Asia crisis in 1998, or in the U.S. before the subprime debacle. This gauge is an almost mechanical indicator of a future credit crisis." .. an analogy can be made to the Qing Dynasty in the late 19th century when economic reformers battling to modernize the economy were ultimately defeated by the old guard .. "With luck, the rest of us outside China will have three or four more months to order our own affairs before the storm gathers. Whether it is bumpy landing, a hard landing, or a crash landing, depends on who the 'authoritative person' in Beijing turn out to be."
LINK HERE to the article

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