Space travel is one of many recent huge investments
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-"China claims its debt-to-GDP ratio—the standard measure of sustainability—was a healthy 17 percent at the end of last year. Yet Beijing-based Dragonomics, a well-respected consultancy, put China’s ratio at 89 percent—about the same as America’s. Worse still, a growing number of analysts think the Chinese ratio was really 160 percent."
“And very sincerely, I want to make clear that you have nothing to worry about,” the vice president said.
Whether or not he succeeded in soothing his hosts’ anxiety remains to be seen.
Yet in trying to placate Beijing, the vice president was making a major miscalculation.
China may own $1.2 trillion in U.S. Treasury obligations, but from the get-go, Biden should have eschewed playing defense and gone on the offensive.
He should have asked the Chinese to reassure him about their debt problems and, more urgently, their impending economic slide.
Yet in trying to placate Beijing, the vice president was making a major miscalculation.
China may own $1.2 trillion in U.S. Treasury obligations, but from the get-go, Biden should have eschewed playing defense and gone on the offensive.
He should have asked the Chinese to reassure him about their debt problems and, more urgently, their impending economic slide.
Despite all the apocalyptic pronouncements about America’s budget problems, the reality is that the U.S. has a higher credit rating than China and, unlike Beijing, has never repudiated its sovereign debt. More important, the People’s Republic has been understating its debt for years to avoid global attention and criticism.
Indeed, China claims its debt-to-GDP ratio—the standard measure of sustainability—was a healthy 17 percent at the end of last year. Yet Beijing-based Dragonomics, a well-respected consultancy, put China’s ratio at 89 percent—about the same as America’s. Worse still, a growing number of analysts think the Chinese ratio was really 160 percent. At that astronomical level, China looks worse than Greece.
The wide discrepancy in estimates is due to the so-called hidden debts. The largest of these off-the-books obligations have been incurred by local governments and state banks. Yet there are other components, including central-government debt incurred for municipal and local projects, Ministry of Finance guarantees related to partial bank recapitalizations, and miscellaneous obligations such as grain-subsidy payments. No one actually thinks Beijing will default on its outstanding external debt, but these hidden obligations matter; to work down the crushing debt load, the country’s technocrats are adopting strategies that will cripple growth for a decade, maybe longer.
This post originally appeared at The Daily Beast.It didn’t have to happen this way. When the global downturn hit in 2008, China decided to spend its way out of the crisis. The country adopted a stimulus program that in 2009 pumped, according to my calculations, about $1.1 trillion into its then–$4.3 trillion economy. Beijing created robust growth—9.1 percent in 2009 and 10.3 percent last year—but in the process, the country’s hidden debts ballooned, as the country’s leaders forced state banks to lend to unviable projects.
These include ghost cities such as Ordos in Inner Mongolia, where the government has built sundry new homes and office buildings, which remain empty. Last year, the state grid reported there were 64.5 million flats—enough housing for 200 million people—that used no electricity for six consecutive months. Despite the obvious oversupply, the government—in conjunction with private developers—is constructing 40 million to 50 million more units. And the Chinese government recently announced it will be building 20 new cities a year over the next two decades.
All this building is technically creating gross domestic product, but it is extraordinarily wasteful. In a free-market economy, this grossly imbalanced situation would lead to both a property crisis and a banking crisis. Weak developers and financial institutions would go bankrupt, their assets would end up in the hands of more productive market participants, and the economy would recover quickly.
But Chinese leaders are not allowing this creative destruction to occur. To rescue financial institutions, for instance, central authorities are forcing down interest rates paid to depositors so that banks can earn their way out of difficulties. Yet in doing so, they are condemning their economy to years of stagnation.
By keeping deposit rates artificially low, the government depresses the income of households. Consumption accounts for just 34 percent of the economy in China—the lowest rate in the world—compared with about 70 percent in America. For the country’s economy to achieve sustainability, its consumers will have to spend more.
That’s unlikely to happen, however, as Beijing is essentially adopting the same fundamentally flawed tactic that Tokyo employed in the early 1990s to work its way out of its infamous housing bubble. Japan’s economy has never fully regained its dynamism, and China’s won’t either, unless Beijing radically changes course.
Politically, that doesn’t seem feasible. The Communist Party has begun its historic transition from fourth- to fifth-generation leaders, and the result has been paralysis. At the moment, current officials seem to be just buying time until they leave office—and then hand intractable problems to someone else. No one in Beijing is willing to take the steps necessary to put the economy on a sound basis.
Washington, of course, is no stranger to gridlock and head-in-the-sand economics. Yet until now, just about everyone seemed to be looking to the Chinese to become the new engine of world economic growth. We will surely be disappointed. China has just begun another long descent. Biden should have spoken up.-Why China’s Debt Problems Are Worse Than America's
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-- Lạm phát tại Trung Quốc lên đến mức đỉnh điểm (TTXVN). - Sống chung với kinh tế đen Trung Quốc (Bee). - Kinh tế Trung Quốc: “Lành ít, dữ nhiều”(Tamnhin.net) -
- Trung Quốc đánh giá lại nợ của các địa phương để giảm bớt rủi ro tài chính — (RFI). -Analysis: China unlikely to cool investment as its growth engineBEIJING (Reuters) - China's long-term plan to cut reliance on investment as a growth engine is clashing with its short-term need for protection against a worsening global outlook.
-Learning to Live with China’s Economic Dominance Peterson Institute
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 [...]
- China’s Economy Faces Obstacles in Rebalancing
from NYT by By EDWARD WONG
Leaders are finding it difficult to steer China away from growth that relies largely on infrastructure, construction and export manufacturing, economists and financial analysts say.- TQ sẽ cho phép các nhà đầu tư nước ngoài sử dụng đồng Nguyên - VOA -
Trung Quốc đã soạn thảo các qui định trong đó cho phép đồng Nguyên được sử dụng cho các dự án đầu tư nước ngoài tại nền kinh tế lớn thứ nhì thế giới này.
Qui định do Bộ Thương mại soạn thảo sẽ cho phép các nhà đầu tư nước ngoài sử dụng đồng Nguyên để huy động vốn thông qua các thỏa thuận thương mại xuyên biên giới, phát hành trái phiếu ra nước ngoài hay bán cổ phiếu.
Bộ này đang ghi nhận phản hồi của công chúng về qui định này cho tới ngày 31 tháng 8.
Trung Quốc đã cho phép tiền tệ của nước họ được sử dụng rộng rãi hơn trong các giao dịch xuyên biên giới nhằm giảm sự lệ thuộc vào đồng đôla Mỹ và đưa đồng Nguyên trở thành một loại tiền tệ tòan cầu.
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--FELDSTEIN: China’s New Currency Policy Project Syndicate
FELDSTEIN: China’s New Currency Policy The Chinese government may be about to let the renminbi-dollar exchange rate rise more rapidly in the coming months than it did during the past year. There are two fundamental reasons why the authorities might choose such a policy: reducing its portfolio risk and containing domestic inflation.
----------- Phó Tổng thống Mỹ trấn an Trung Quốc về vấn đề nợ của Hoa Kỳ – (VOA). – Phó Tổng thống Mỹ trấn an TQ về nợ – (BBC). – Phó tổng thống J.Biden trấn an Trung Quốc về khả năng trả nợ của Mỹ – (RFI). – Phó Tổng thống Mỹ: Washington sẽ không “xù” nợ (TTXVN).
- Pháp : Nợ công lên đến mức đáng ngại buộc phải có biện pháp tiết kiệm – (RFI).
- Trùm đầu cơ George Soros bàn về khủng hoảng nợ châu Âu
“Bóng ma” nợ công châu Âu lại nhấn chìm Phố Wall (VnEconomy) -Cuộc gặp thượng đỉnh Pháp - Đức đã không thể dập tắt những lo sợ về khủng hoảng nợ công châu Âu như nhà đầu tư kỳ vọng
- - Châu Á lo lắng trước những khó khăn kinh tế của châu Âu và Mỹ — (RFI).Trong những ngày vừa qua, các nước châu Á tỏ ra lo lắng trước tình hình kinh tế Mỹ và châu Âu đang gặp khó khăn.
- Chính phủ Bersluconi buộc phải đưa ra chính sách khắc khổ cho nước Ý — (RFI).
-Nợ - đối tượng của cuộc đấu tranh chính trị nóng bỏng
Rạng sáng 3-8 (theo giờ Việt Nam), Tổng thống Ba - rắc Ô -ba - ma (Barack Obama) đã kí Dự luật nâng mức trần
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Economic Integration - Để dạy học: When money brought us together (Boston Globe 14-8-11) -- VERY USEFUL!
- Thế giới tái khủng hoảng hay chỉ là “bão” tin đồn? (VnEconomy).- Chủ tịch Ngân hàng Thế giới (WB) Robert Zoellick: Thế giới đối mặt với đợt suy thoái mới (DV).
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Economic Integration - Để dạy học: When money brought us together (Boston Globe 14-8-11) -- VERY USEFUL!
- Thế giới tái khủng hoảng hay chỉ là “bão” tin đồn? (VnEconomy).- Chủ tịch Ngân hàng Thế giới (WB) Robert Zoellick: Thế giới đối mặt với đợt suy thoái mới (DV).
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