Understanding China, One Blog at a Time

An American in China

China’s Economic Decline is Imminent

Posted by w_thames_the_d on September 25, 2013

China has too much debt. The government has thrived due to a heavy dose of foreign investment and insane levels of household savings. The former was due to greedy corporations flooding the market and the latter is garnered by Beijing policies geared towards stifling demand of goods. Faced with few investment options, Chinese buy homes and save.

Armed with all that cash, China has looked pretty good over the past decade but has not learned about fiscal malfeasance. During the last financial crisis, corrupt cadres padded their pockets and then sought refuge in civilized countries. What is left is a China teetering on the brink of a debt bomb.

Excerpt from Caixin

Half of Hebei Cities’ Debt Level ‘over 100 Pct’

Six of 11 prefecture-level city governments in the northern province of Hebei had debt levels higher than 100 percent of expected annual tax income, land selling fees and transfer payments as of June 2012, the Ministry of Finance says. The borrowing of Shijiazhuang, the provincial capital, was 241 percent. The report is part of an audit aimed at assessing the level of local government debt around the country.

One Response to “China’s Economic Decline is Imminent”

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