With more than $6 trillion worth of debt, Chinese SOEs and cities find it increasingly difficult to meet payment deadlines.
Malinvestments aside, the Bills Come Due for China’s Local Governments.
For decades, local governments in China borrowed heavily to build urban infrastructure, helping to fuel the country’s red-hot economic growth. Now, they are under pressure to pay the bill, adding another financial worry to Chinese policy makers’ list.
Independent economists estimate that China’s municipalities have racked up more than $6 trillion in debt—including debts authorities don’t acknowledge on their books. Tax revenue and returns on the roads and other infrastructure built with borrowed money aren’t enough to pay down the debts. Land sales, which local governments have relied on, have weakened as the economy slows.
With nearly 3 trillion yuan ($428 billion) in bonds coming due in the next two years, on top of bank loans and hidden debt, local governments need to find ways to refinance.
Meanwhile, it has become nearly impossible for local governments to tap riskier lending channels. Beijing’s efforts to rein in overall debt has meant new restrictions on informal lending. “Previously, local governments could just keep on rolling over debt, but now they can’t do that,” said Allen Feng, a China analyst for consulting firm Rhodium Group in Singapore.
China, like Japan in the 1990s, Will Be Dominated by Huge Zombie Banks
None of the above is in the least surprising.
As noted on November 18, China, like Japan in the 1990s, Will Be Dominated by Huge Zombie Banks
On November 22, I commented Key Thought of the Day: China Today is Like Japan in 1989.
But it’s not just China.
$250 Trillion in Global Debt
Questions abound.
For example, I wonder about the $250 Trillion in Global Debt: How Can That Be Paid Back?
If you don’t believe it can be paid back, then I am with you.
My answer is to buy gold. What’s yours?
For discussion, please consider How Does Gold React to Interest Rate Policy?
Mike “Mish” Shedlock
Perhaps transactions will be done with something like bit coin.
Anyone ever think about how the world will be in 100, 500, 1,000 years? No, the only thought is “what will happen when the markets open tomorrow”? The future doesn’t matter.
My earliest ancestor that we have information on was “born in a foreign land”, likely Scotland or Ireland. Came to this country and fought in the Revolutionary War to escape the King’s control. His son was born in 1776. 243 years and 8 generations ago. Family members, including myself, have fought in every war since. Seems that war is our defining lifeline.
What will the next 243 years bring to yours and my descendants? If the prior 243 are any clue, then it will be more wars, more debt, more lies from the powers that be. Inflation will be the standard of the realm, as it has been since the birth of the “dollar” in 1792, especially since coming off the gold standard.
But…will there even be a dollar? Will it be replaced by a Chinese currency when/if they become the dominant economic and military power in the world? Or will the dollar be replaced by a crypto dollar? Maybe there will be a “world currency” that is also crypto. Or maybe the world will descend into a barter economy after some devastation event.
God only knows, but I do imagine one thing: The world will be a hell of a lot different 8 generations from now and our descendants are going to have to deal with our mistakes.
“Anyone ever think about how the world will be in 100, 500, 1,000 years?”
No because it’s pointless. We can’t even predict what will happen next year.
China endebted up to the eyeballs ? Most countries are these days !… Don t forget however that our utterly stupid ‘leaders’ allowed China to surreptitiously conquer half the world, and the latter is probably an understatement ! How many african, south american, asian and even european countries (Italy, Greece for example) owe enormous amounts of money to China ? Comparing China with Japan doesn t make sense at all, Japan never owned half the world, so don t you ‘worry’ about China, it will be the last house of cards to fall apart when push comes to shove ….
You obviously don’t know your history. At the height of the Japanese bubble they owned vast amounts of land and property all over the world – mainly in marquee locations. When things went bust, they we’re forced into fire sales of most of this, incurring huge losses, many of which the banks are still chewing through today. While China has more geo-strategic ‘stakes’, they simply won’t have the financial resources to maintain all those and will retreat the way the Japanese did. When the economy and the money is pumping, you feel like king of the world – rich beyond measure. When everything turns to sh*t, your true standing is exposed by sunlight.
Current debts are in US dollar # 1. With the creation of the new US dollar # 2, it’s a whole new debt ballgame.
Who is the money owed to?
Per Krugman, “We” owe it to “Ourselves.”
Hence, a perfectly valid way to fund paying it down, is “We” stealing the money to do so. Again, from “ourselves.”
And Krygman’s got a Nobel…. Imagine the silliness you can get away with selling the rest of the dupes, who don’t even have that, but are told to uncritically look up to those who do…..
My question is when will the US and Federal reserve malinvestment bill come due?
The CCP will react in an authoritarian manner to “disappear” this debt. My guess is the first iteration will be a stealth monetization, maybe via a bad bank zombie that will try to jam the debt down some memory hole. Just like the US Fed and bankster cartel will do here sometime in the 2020s.
That is what the CCP banks have been doing. They call them Special Investment Vehicles. It is where bad bank debt goes to disappear. They then have some other entity buy a small portion of the SIV to create a belief that the whole has some value.
There will be no bank runs. The Ministry of State Security will shoot down any crowds that gather outside of banks.
People is China are some of the smartest in the world.
Don’t compare them to Americans.
They will find a way.
Who owns this “asset”? Do they need the interest payments? State owned banks, as are all others, controlled by the CCP. If you are a foreigner, can you get your money out? No.
Lol. You cannot just ‘disappear’ the debt. If it were that easy, then the global $ 250 trillion would be of no concern to anyone. What if you owe the debt to local citizens? How do you just make that go away without causing a riot and social upheaval.
Every debt is someone else’s asset. And every debt gets paid. One way or another.
Where are you storing your gold Mish? Remember the 1930s? Or maybe if the government doesn’t outright confiscate it, they nail us with a 90% windfall profits tax. If that’s the case, what’s the point in owning gold? Store it in Switzerland? Singapore? Perhaps.
Maybe a better idea is to simply leave this country and relocate somewhere else. Still researching this idea.
Make owning gold a capital offense.
Here is the question. Do governments get more repressive or less?
Buy through GoldMoney and hold in an overseas vault. Of course, there’s always the “boating accident” option.
I have an account at GoldMoney
Why is the answer: buy gold?
Shouldn’t it be: buy ammo and MREs?
Those too.
The real answer to your apocalyptic fabulations : Buy first aid and medical supplies, Store canned foods., Cooperate with your neighbors, set up a neighborhood trading system, don’t worry about firearms since plenty of your neighbors already have them. When you work as a group you will be able to defend yourselves easily. On your own, you will not last a week. Also Bourbon and Tobacco.
Don’t forget the toilet paper.
Because if you need bullets and MREs you might also need to go shut down that GE gen 2 nuclear reactor that’s around you.
Or at least make sure it has diesel for the next 5 years so it doesn’t put fallout everywhere.
The most important thing get missed sometimes.
Time To Test 100% correct I tell people this and I get deer in head lights.
I get that look too.
It’s like I am taking away some terrible dream they have.
I have 2 within 50 miles of my house. No less than 10 within 150 miles.
I like to stay positive.