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A telling indicator of imbalance in China’s economy is its sky-high rate of investment. China’s investment rate, as measured by fixed asset investment (FAI), has become so high that it is without precedence in a major economy. Below is China’s level of FAI as a percent of GDP: Many of those bearish on the Chinese [...]
Is China poised to take over from the United States as the world’s most economically dominant power? This is an essential question, and yet it has not yet been taken seriously enough in the United States, where, this central conceit still reigns: the United States’ economic preeminence cannot be seriously threatened because it is the [...]
Have a troublesome loan problem? Just reclassify it! Chinese local government investment platforms have come under increasing scrutiny this year and along with this scrutiny have come new restrictions by the China Banking Regulatory Commission (CBRC). To guard against potential losses on the 10.7 trillion rmb outstanding local government debt, the CBRC has ordered Chinese banks [...]
On July 23, China experienced a horrific train crash involving one of its flagship high-speed railway lines, leading to the death of 42 people and leaving another 190 injured. One question that has been raised post-crash is what the effect will be on the Ministry of Railways’ (MoR) finances.The MoR has taken on massive amounts [...]
There have been a series of stories in the media detailing the trouble small enterprises have faced receiving loans in China. There is likely some degree of truth to these anecdotes. Given the credit tightening policies pursued by the authorities, there are probably many deserving enterprises that have been turned away by the banks this year. However, a [...]
One of the most prevalent claims bandied about is that China’s stimulus went overwhelmingly to state-owned enterprises and set back the development of the private sector. The data on the actual implementation of the stimulus package is spotty, but an analysis of loan trends in China during the past two years (for which the data is more complete) shows [...]
The renminbi’s managed peg against the dollar is one of the cornerstones of Chinese economic policy. Typically, maintaining such a peg in the face of significant pressure to appreciate would be extremely difficult. The People’s Bank of China (PBoC) is forced to print large quantities of renminbi and buy up dollars in order to combat [...]
What’s going on with Chinese local government debt? The question has come to the forefront over the past several months with questions about both the size and severity of Chinese local government debt burdens. Direct borrowing by local governments is mostly restricted in China. In order to circumvent these restrictions, local governments have turned to [...]