The Chinese stock market hit a four year high today at 3,020. This is up 53% since the middle of 2013 low and up 48% in the last six months. I guess this must mean the Chinese economy is operating on all cylinders. If you think so, you’d be wrong. Barron’s interviewed a no-nonsense woman who has lived, worked and analyzed China from within since 1985. Anne Stevenson-Yang has spent the bulk of her professional life there working as a journalist, magazine publisher, and software executive, with stints in between heading up the U.S. Information Technology office and the China operations of the U.S.-China Business Council. She’s now research director of J Capital, an outfit that works for foreign investors in China doing fundamental research on local companies and tracking macroeconomic developments.
This lady is about as blunt as you can get about Chinese fraud, lies, mal-investment, and data manipulation. The entire Chinese economic miracle is a fraud. The reforms are false. The leaders are corrupt and as evil as ever. The entire edifice is built upon a Himalayan mountain of bad debt.
The slave labor manufacturer for the world’s mal-investments since 2008 make Japan look like pikers.
China, for all its talk about economic reform, is in big trouble. The old model of relying on export growth and heavy investment to power the economy isn’t working anymore. Sure, the nation has been hugely successful over recent decades in providing its people with literacy, a decent life, basic health care, shelter, and safe cities. But starting in 2008, China sought to counter global recession with huge amounts of ill-advised investment in redundant industrial capacity and vanity infrastructure projects—you know, airports with no commercial flights, highways to nowhere, and stadiums with no teams. The country is now submerged by the tsunami of bad debt that begets further unhealthy credit growth to service this debt.
The BLS should take lessons from the Chinese government in data falsification. But, the American MSM dutifully reports the Chinese data as if it was real. Faux journalism at its finest.
People are crazy if they believe any government statistics, which, of course, are largely fabricated. In China, the Heisenberg uncertainty principle of physics holds sway, whereby the mere observation of economic numbers changes their behavior. For a time we started to look at numbers like electric-power production and freight traffic to get a line on actual economic growth because no one believed the gross- domestic-product figures. It didn’t take long for Beijing to figure this out and start doctoring those numbers, too.
Real numbers from the real economy and real companies reveal the truth about the Chinese economy. If revenues are falling, why is the Chinese stock market up 48% in the last six months? The same reason the U.S. stock market is up. Rampant speculation created by blind faith in central bankers and central banks buying stocks.
I’d be shocked if China is currently growing at a rate above, say, 4%, and any growth at all is coming from financial services, which ultimately depend on sustained growth in the rest of the economy. Think about it: Property sales are in decline, steel production is falling, commercial long-and short-haul vehicle sales are continuing to implode, and much of the growth in GDP is coming from huge rises in inventories across the economy. We track the 400 Chinese consumer companies listed on the Shanghai and Shenzhen stock markets, and in the third quarter, their gross revenues fell 4% from a year ago. This is hardly a vibrant economy.
The Chinese are learning the same thing as Americans. Stimulus does nothing for the average person or the real economy. It benefits crony capitalists and crony communists. It results in mal-investment, booming stock markets and ultimately a bust – that will negatively impact the average person.
By our calculations, since June the central government directly and indirectly has added more than $400 billion of stimulus and relaxed lending terms for housing purchases. Yet, every spasm of new stimulus seems less and less effective in boosting the economy. So most likely, China is sinking into a deflationary recession that’s increasing in speed and may take some time to run its course. Investors have lost faith in the property market, which alone comprises about 20% of GDP, when taking into account the entire supply chain, from iron-ore production to construction to related financial services and appliance sales. Employment and wage compensation will suffer. Consumption will continue to suffer. There’s even an outside possibility that China’s economic miracle could end up in a fiery crash landing, if a surge in banking-system loan defaults outruns government regulators’ attempt to contain such a credit crisis and restore financial confidence.
The diminishing effectiveness of Keynesian claptrap projects is evident for all to see.
The giant government economic-stimulus programs since 2008 are rapidly losing their effectiveness. The reason is simple. Much of the money has been squandered in money-losing industrial projects and vanity infrastructure spending that make no economic sense beyond supplying temporary bump-ups in GDP growth. China is riding an involuntary credit treadmill where much new money has to be hosed into the economy just to sustain ever-mounting bad-debt totals. Capital efficiency, or the amount of capital it takes to generate a unit of GDP growth, has soared as a result.
Nothing like 50 million unoccupied housing units to create the greatest housing bust in world history. Maybe Blackstone can work its buy to rent strategy in China. It’s worked so well here in the U.S.
The Chinese home real estate market, mostly units in high-rise buildings, is truly bizarre. Many Chinese regard apartments as capital-gains machines rather than sources of shelter. In fact, there are 50 million units in China that are owned but vacant. The owners won’t rent them because used apartments suffer an immediate haircut in value. It’s as if the government created a new asset class that no one lives in. This fact gives lie to the commonly held myth that the buildout of all these empty towers and ghost cities is a Chinese urbanization play. The only city folk who don’t own housing are the millions of migrant laborers continuously flocking to Chinese cities. Yet, they can’t afford the new housing.
China should rename themselves Bad Debts R Us. I’m sure they can keep the bad debt balls in the air for another decade. Right?
Interestingly, liquidity seems to be a growing problem in China. Chinese corporations have taken on $1.5 trillion in foreign debt in the past year or so, where previously they had none. A lot of it is short term. If defaults start to cascade through the economy, it will be more difficult for China to hide its debt problems now that foreign investors are involved. It’s here that a credit crisis could start. Bad debt in China never seems to get written down. The huge pile of nonperforming bank loans that Beijing assumed earlier in the millennium in order to be able to take its major banks public still sits on the balance sheets of various asset-management companies.
China is still an evil communist nation that disregards human rights, murders its citizens, crushes dissent, and suppresses free speech. Other than that, they are a great bunch of guys.
In my opinion, the press is somewhat guilty of willing suspension of disbelief on developments in China. Xi’s agenda of Confucian [moral] purification has nothing to do with opening up the economy or social reform. He wants to bolster the power of the Communist Party and tamp down the cynicism about the system that is increasing in China. This explains in large part his bellicosity in the South China Sea, quashing of dissent on the Internet and elsewhere, and heavy-handed attacks on non-Han populations like the Uighurs. He openly disdains Western democratic values. As for Xi’s much-ballyhooed anti-corruption campaign inside China, it offends me that international media depict it as a good-governance effort. What’s really going on is an old-style party purge reminiscent of the 1950s and 1960s with quota-driven arrests, summary trials, mysterious disappearances, and suicides, which has already entrapped, by our calculations, 100,000 party operatives and others. The intent is not moral purification by the Xi administration but instead the elimination of political enemies and other claimants to the economy’s spoils.
Nothing like a little blunt truth on the day the Chinese stock market hits a four year high. Nothing but smoggy skies ahead.
No problem, look at the Dow, everything is coming up roses! (sarc) John
Nothing reported is real.
No gov’t statistics are real.
No “gang rapes” published in the MSM (and parroted across the rest of the MSM) are real.
No rising tide of white-on-black violence is real
No “rape culture” anywhere in America is real.
What can we deduce from this?
The disconnection of underlying reality of those “telling us” things is vast.
The number of such people is actually quite small.
The influence of such people is vastly out of proportion to their actual significance.
The actions induced by such people are at odds with reality and thus evil and destructive.
My conclusion: When this trend reverses, the RAGE component will be large. I envision something like when Italy’s corporatist state fell during WW II, and every person remotely associated with it was summarily hung by the neck from the nearest tree or lamp post.
I would NOT want to be a well-known journalist, gender feminist, university employee or apologist for open immigration when the masses of American wake up and comprehend what happened to them….and who instigated it.
Hey!!!!
I’m a university employee.
Don’t hang me bro.
And I’m a pharma rep (sort of.) Lots of evil to go around.
Joking aside, my view is that we have no idea at whom the full spectrum of rage will be directed. In Pol Pot’s Cambodia, all “educated” people were summarily slaughtered, to include anyone who wore glasses. I doubt that’s likely in North America, but know knows?
As Italy’s Fascists fell, poor sods wearing the uniform of a street car conductor were reportedly strung up.
I think all this is tragic, but also part of the dark side of human social behavior that is as natural as every other natural aspect of our species.
When I see low IQ American blacks telling a Caucasian guy that he’s the devil because he’s got light skin, what I know is that if the gloves come off, those guys will be hunted to extinction. Caucasians have numbers and intelligence on their side, and among defined groups in the USA, blacks have no allies. Sadly, the Dominant Narrative for low IQ blacks is now “Whitey’s the Devil” and as that Narrative guides their actions and is slowly incorporated into the Dominant Narrative of Middle-American Caucasians (it’s just beginning to be so), the catalyst of an overt economic depression should predictably result in open warfare, a conflict low IQ blacks are certain to lose and whose collateral damage (to everyone else) should be catastrophic and long-lasting.
Ironically, it is reliance on the police on the part of Caucasians and high IQ blacks that keeps “the gloves” on. If Caucasians’ Narrative embraces a “we’re on our own” subroutine, holy shit will bad things happen. People think indiscriminate slaughter is what Middle Easterners and certain Eastern Europeans do, but never here in the Land of the Free.
Oh, on the contrary. Sherman’s March to the Sea entailed untold horrors, driven by nothing deeper than ideology and an economic decline.
All the ingredients are already in this pot to render a spasm of blood-letting that will be Top of Mind for centuries to come (unless there’s also a nuclear war in coming years, which will of course top any internecine killing sprees.)
I don’t like it, but that’s how I see it.
Spoke to a Chinese friend the other day. He is a Hong Kong Chinese with a British passport, which he never lets out of his sight. “Mr. Chen” is as honest as the day is long, successful, and hard-working. He loathes the ChiComs, who he has to work with all the time. According to him, every single word of the above article is spot on. We are all in big, big trouble when this thing blows.
Add it all up: Declining economies world-wide being hidden from their populations. – US and Russia ramping up their military assets in the region. – The bottom dropping out of oil, coal, copper, steel and other major commodities. – A massive political purge in China. – The EU countries either collapsed or teetering on the brink. – Financial collapse inevitablity being held at bay by desperate measures. – The NWO/Agenda 21 forces champing at the bit to ‘get er done’.
What’s the cure when all these things (and many others) can’t be hidden or held in check any longer? WWIII…
Land of reforms and home of the… capitalist?
Posted by Ken Schortgen | December 7, 2014 | 14 Comments
In 2014 if I were to ask this audience which country is striving to be more open to the needs of their citizens, has arrested, jailed, and even out to death criminal bankers and CEO’s, and is now offering foreigners the chance to be a part of their nation’s economic growth, which country would you think I was talking about?
If you said the United States, then put down the history books because that is so 20th century. No, the right answer is…
China.
China and Nepal on Friday signed an agreement, according to which China has agreed to provide a 97 percent duty free treatment for major export products from Nepal.
The duty free treatment will be applied to 8,030 major export items of Nepal.
The memorandum of understanding was signed by Secretary of Ministry of Commerce and Supply Narayan Gopal Malego and Chinese Ambassador to Nepal Wu Chuntai.
China has been the second largest trading partner of Nepal in import, and seventh largest in export. – China Daily
Wait a second… haven’t we been inundated for decades that China is a brutal tyrant to Nepal? Perhaps in the past yes, but under China’s new Premier and reformist leader Xi Jinping, China has changed course from a militaristic approach for controlling the Tibetans, and instead is offering them a chance for economic growth in the new economy, which by itself should lessen tensions between the two governments, and lead to greater peaceful intentions.
China opens projects worth billions to private investors
The Chinese Ministry of Finance (MOF) rolled out 30 projects on Thursday to solicit private capital in the form of a public-private partnership (PPP).
These projects, worth a total of 180 billion yuan ($29.3 billion), include water and heating supply, sewer systems, garbage disposal, underground pipe networks, medical care, sports facilities and other urban infrastructure.
Both domestic and foreign investors are welcome to take part in the construction and operation of these projects as China is striving to lower government spending and improve public service.
Public and private cooperation? And and invitation for foreigners to be a part of this project? Nah… this can’t be China we’re talking about is it?
But there’s more…
China seeks opinions on economic work
The Communist Party of China (CPC) Central Committee heard opinions from other political parties, business leaders and representatives of independent personalities about the government’s economic work on Monday, according to a statement released Friday.
Chinese President Xi Jinping presided over the symposium. Premier Li Keqiang briefed the attendees on China’s economic situation and plans for next year’s economic work.
Other senior leaders including Yu Zhengsheng, Liu Yunshan and Zhang Gaoli attended the event.
“The situation for China’s economic development is generally sound and the economic grow this currently within a proper range,” Xi said.
Now stop right here! The Communist Party not only soliciting opinions and ideas from other political parties, but seeks to co-opt them into the overall program of economic growth?
But these ideas are only for the major industrial sectors and municipal provinces right?
China strives to boost the rural economy
Fiscal and monetary support to agriculture including tax breaks for banks that lend to the sector is set to continue according to China’s cabinet, the State Council.
Specific measures announced after Wednesday’s cabinet meeting include tax exemptions of bank income from loans made to farmers. Corporate income tax will only be payable on 90 percent of such revenue. Agricultural loans enjoying such tax breaks had to be less than 50,000 yuan ($8,000) previously, but the ceiling has now been raised to 100,000 yuan.
To bring insurance support to the sector, a 3-percent discount on turnover tax payable by county-level financial institutions in their insurance premiums will continue till the end of 2016.Insurers’ premium revenue from crop and husbandry insurance shall enjoy a 10 percent discount in corporate income tax calculation.
And the most fascinating thing about all of these capitalistic policies and programs… is that they were all set in motion within the last seven days.
The Chinese government appears to not only be taking their role as the number one economy in the world seriously, but are relishing in the fact that they suddenly have the opportunity to use money and economics as a means to deal with domestic and global issues that once required political and military doctrines. And while many Americans fear the takeover of China that is occurring in and around several parts of the United States because of our own corruption and fascist policies over the past four decades, the underlying reality is that China is only doing what every empire (Greece, Rome, Britain, U.S.) has done when they became the most powerful, and just as those immigrants who came to these shores 100 years ago prospered before and after America became a world economic power, so too are their being opportunities opened for anyone with the will, fortitude, skills, and talents to disregard dying nationalist jingoism, and seek opportunities where they lie in the coming new global financial order.
Billionaire Jim Rogers – Why I moved to Singapore (2009)
Written by Ken Schortgen
Ken Schortgen Jr. is a finance writer with a deep background in economics, history, and geo politics. His work has been featured by various national sources and is key individual at the Examiner.com
This is a comment on the article above from someone living in China.
“Like Dog, I spend a lot of time in China. My total time here may be more than his cuz I live here 24/7. He and Ken are both right. And there is still more to see and know. Books and books can be written about the complexities of modern China.
Whatever we have to say about the gubmit, the people here are generally morally upright and endeavor to live the best lives they can. Christianity is the fastest growing religion, and people worship in home churches at great personal risk. Yet they keep the faith. Not so in the USA.
I think a division needs to be made between the people who live here and the government that rules. Like just about everywhere, the ordinary folk are doing their best to live honestly and forthrightly, and the government is doing their best to take advantage of them. They are far more philosophical about it than we are cuz they’ve had to do it for 5000 years. there is no tradition, no heritage of individual liberty and democracy here. And frankly, I think they have at least another generation to go before they can even talk about it responsibly. the place isn’t ready for it yet.
Perhaps God has other blessings in store for these people. Who are we to question God’s wisdom?
If there’s one thing I’ve never been subject to in China, it’s a crotch search. Another is a license inspection. Never been audited either. never been asked for any papers, except when crossing int’l boundaries, registering as a resident alien or flying. Never had my bags inspected entering or leaving. Never been told what kind of toilet to buy, shower head to use, or what kind of light bulbs I can use. I don’t have to put my cold can o beer in a paper bag when I’m outside. Never been corrected or admonished over “politically incorrect” speech. When women are told they look nice, they say thank you and become cheerful, rather than curse you for seeing them as objects. My classes scream with laughter at risque humor rather than report it to human resources. People aren’t afraid to say “I’m fat” or “You’re fat”.
I could go on.
On the level of everyday life, China is in many ways far freer than America. There is a trade-off. And as time passes, China gains in that trade-off as America deteriorates.”
Im sure with the lower fuel prices China will see a resurgence in toy factory profits and sex doll sales.
I had to bury my head way up my anal cavity to come to grips with WHY Americans were so willing to give our productivity to the ChiComs. Nobody noticed, nobody cared…………I noticed , I cared….so if it all goes in the shitter , too f@#king bad.
I guess somebody read my post.
China Crashes: Shanghai Composite Plunges 5.4% Amid Record Trading, Biggest Tumble Since 2009
Submitted by Tyler Durden on 12/09/2014 06:36 -0500
Those who have been following the ridiculous moves in the Shanghai Composite in recent months, knew it was only a matter of time before yet another major stock market (one which recently surpassed the Nikkei for the second largest spot in the world) crashed violently, further eroding faith in the centrall-planned “price discovery” process. The only question was when.
Following our report last night about China’s change in collateral rules, in which we noted that none other than the PBOC was now eager to pop the equity bubble following the PBOC simultaneously fixing the CNY significantly stronger (implicit tightening) and enforced considerably stricter collateral rules on short-term loans/repos – a move which according to estimates from Shenyin Wanguo Securities, would disqualify some 1.25 trillion yuan in corporate bonds as repo collateral, or 60% of all outstanding corporate bonds listed on China’s two stock exchanges – we were not surprised to see the tumble in the market-traded Yuan (which crashed the most in 6 years), and the surge in interest rate swaps, coupled by the plunge in corporate bonds. The only thing that puzzled us was why, after the correct kneejerk reaction lower in the Shcomp, did stocks proceed to surge even higher.
That said, we summarized it as follows:
The PBOC has aggressively taken action to reduce leverage in stock and bond market speculation
The PBOC has tightened monetary policy – raising FX and cutting collateral availability
The PBOC has created a major squeeze in USDCNY – stalling carry trades
We concluded as follows: “We will see what kind of fallout this creates but for now stocks are holding up as FX and bond markets are turmoiling.”
* * *
We didn’t have long to wait, because literally a few short hours after we wrote that sentence, this happened:
CHINA’S SHANGHAI COMPOSITE INDEX DROPS 5% AMID RECORD TRADING
Because the higher they rise the quicker and more violently they plunge. Here are the details via Bloomberg:
Benchmark index falls as much as 6.2%, most since Aug. 31, 2009, on record volume.
Value of shares changing hands on Shanghai and Shenzhen stock exchanges reaches 1.18t yuan at 2:51pm, highest on record
Shanghai Composite earlier rose as much as 2.4%
Index set to snap five-day 13% win streak
CSI 300 -4.8%; HSCEI -4.5% in H.K. trading
CSI 300 snaps record win streak, dropping for 1st time in 13 sessions
Shanghai margin trading, short-sell balance rose yday to 601.7b yuan
Ironically, and as has been the case throughout the western world, the crash in stocks promptly led to a capital reallocation, and all the earlier moves in other asset classes were quickly reversed as panicked speculators rushed out of stocks into everything else that had been sold off earlier:
Yield on 4.13% govt bond due Sept 2024 reverses rise, falling 12 bps to 3.730%
1-yr IRS drops 4 bps to 3.3400%, reversing earlier rise by as much as 29 bps; 5-yr contracts down 6 bps to 3.5400% after rising by as much as 30 bps
7-day repo rate rises 9 bps to 3.5719%
Yuan falls 0.21% to 6.1855 per dollar after earlier dropping by as much as 0.55%, most since Dec. 2008; PBOC sets reference rate 0.08% higher at 6.1231
That said, it is likely to get much worse before it gets better as the government will now be running and popping bubble after bubble until it extinguishes all the excess liquidity:
China Securities Depository and Clearing Corp.’s announcement yesterday will significantly reduce source of funds for securities firms and funds as these institutions usually pledge bonds for funding in exchange (bond repurchase) market, ANZ says in note; overall liquidity conditions could be tightened as many financial institutions will have to lower leverage ratio
The liquidity crunch may have already taken place, with the FT reporting that Industrial and Commercial Bank of China, China Construction Bank, Bank of China have raised rates on time deposits to 20% above benchmark over past week. Why else would they be doing this if not to entice depositors to park their cash at just these banks. And how long before everyone else follows, and what happens to inflation then and the biggest bubble of all: housing, which as we have been reporting since the beginning of the year, is teetering on the verge of total collapse?
Here is a more detailed narrative of the Chinese crash from the WSJ:
China’s stocks, currency and corporate bonds suffered their largest tumbles in years Tuesday after Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system.
The selloff started in the bond market, as traders rushed to sell and raise cash after a regulator banned investors from using low-grade corporate debt as collateral to borrow cash. The turmoil then spread to the yuan, which recorded its biggest two-day tumble ever. Later, the benchmark Shanghai index slumped 5.4% to record its biggest fall since 2009.
The sudden moves serve as a reminder to global investors about the country’s shaky finances, just as China opens up its capital markets more to overseas cash. Policy makers gathering in Beijing this week for a key summit are signaling to the investing public that they should prepare for a lengthy period of slower economic growth after years of amassing debt to fuel high growth levels.
The slump in the stock market was especially stark, though not entirely unexpected, after it had surged recently to become the world’s top performing index. Retail investors had fueled the rally, returning to stocks after once-popular investments, including high-yielding wealth management products and gold, turned sour.
“I was actually doing a presentation in my office during the last ten minutes of trading, when my boss asked to me to stop and asked everyone to look at stock prices. Then I saw the incredible fall of the Shanghai index and my stocks that have turned from black to red in just a few hours,” said Wu Yunfeng, a Shanghai-based retail investor.
And so another Meep Meep learns his lesson. If only this time it was for more than 15 minutes…
Chinese stocks slide after Beijing tightens rules on loans
By Shen Hong
Published: Dec 9, 2014 4:48 a.m. ET
SHANGHAI — China’s stocks, currency and corporate bonds suffered their largest tumbles in years Tuesday after Beijing took fresh steps to rein in growing risks in the country’s debt-laden financial system.
The selloff started in the bond market, as traders rushed to sell and raise cash after a regulator banned investors from using low-grade corporate debt as collateral to borrow cash. The turmoil then spread to the yuan USDCNY, +0.35% , which recorded its biggest two-day tumble ever. Later, the benchmark Shanghai index SHCOMP, -5.43% slumped 5.4% to record its biggest fall since 2009. Read: Shares fall in Shanghai as investors cash in on volatility
The sudden moves serve as a reminder to global investors about the country’s shaky finances just as China opens up its capital markets further to overseas cash. Policymakers gathering in Beijing this week for a key summit are signaling to the investing public they should prepare for a lengthy period of slower economic growth after years of binging on debt to fuel high growth levels.
The slump in the stock market was especially stark, though not entirely unexpected after it had surged in the past weeks to become the world’s top performing index. Retail investors had fuelled the rally, flocking back to stocks after once-popular investments like high-yielding wealth management products and gold have turned sour and left them with few other investing options.
“I was actually doing a presentation in my office during the last 10 minutes of trading, when my boss asked to me to stop and asked everyone to look at stock prices. Then I saw the incredible fall of the Shanghai index and my stocks that have turned from black to red in just a few hours,” said Wu Yunfeng, a Shanghai-based retail investor.
The trigger for the broad selloff Tuesday was the country’s securities clearing house saying late Monday it had raised the threshold for corporate bonds qualifying as collateral for repurchase agreements, or repos, which are short-term loans with maturity spanning from overnight to 182 days. These are used as a key channel of short-term funding for bond investors.
“The new rule is to prevent risks from building up further as a result of high leverage in the market,” said Xu Hanfei, analyst at Guotai Jun’an. Xu added that the combined outstanding value of repos on the country’s two exchanges has surpassed 700 billion yuan ($113.47 billion).
According to estimates by Shenyin Wanguo Securities, the total value of corporate bonds disqualified as repo collateral under the new rule exceeds 1.25 trillion yuan, or 60% of all outstanding corporate bonds listed on the two stock exchanges.
The move to cut down on the use of this risky debt is central to Beijing’s structural reforms to help sustain economic growth over the longer term by reducing the reliance on state investment and exports and boost the role of consumption. That policy shift though could hold back expansion in the short term if it chokes off credit to industries such as steel and cement, where problems with overcapacity are already widespread.
The People’s Daily, the Communist Party’s flagship newspaper, gave prominent treatment to a report proclaiming slower growth was a “new normal” while it published a lengthy commentary from a top government think tank saying structural reforms and better-quality growth were the key economic objectives.
Late last month the central bank cut interest rates for the first time in over two years, accelerating the rally in the stock market on bets Beijing was keen to bolster slowing growth. But the reports in the official media Tuesday could be a sign that the government will tolerate slower growth.
In its statement, the country’s securities clearing house said the new rule also applies to bonds issued by local government financing vehicles that aren’t explicitly covered by local authorities’ budgets.
That follows a series of measures taken by the Chinese authorities to impose tougher financial discipline on local governments and keep their debt levels in check. In early October, China’s cabinet said Beijing won’t bail local governments out when they fail to repay their debts and will impose ceilings on their borrowing.
China’s local governments have taken on huge debts in recent years to fund infrastructure projects since Beijing opened the credit spigot to combat the global financial crisis.
They have had a tough time this year repaying debt as fiscal revenue growth has slowed in the face of a weaker national economy and China’s property market downturn.
Almost 40% of the 17.9 trillion yuan in local government debt and guarantees will mature by the end of this year, placing huge pressure on local governments to make repayments, according to a report released by the state auditor late last year.