More debt, more empty cities


“The biggest concern regarding financial stability and the sustainability of economic growth has been China’s ballooning debt problem, especially in the corporate sector,” according to a note published by JPMorgan. Chinese corporate debt is among the highest in the world — it’s a stunning 162% of gross domestic product.

The country’s debt will take serious and prolonged policy changes to rectify, said JPMorgan economists led by Haibin Zhu, the firm’s chief China economist. China’s slowdown comes alongside other economic red flags from its economy including poor PMI figures, lower exports, an aging workforce, and spiralling household debt.

JPMorgan pushed back on estimates that China would soon overtake the US as the world’s biggest economy, predicting that China’s growth potential would slow from a 6.5% level to 5.5% in 2021 through 2025 and 4.5% in 2026 through 2030. “This means that China will remain the second-largest economy much longer than expected,” the economists said.

“The transition to slower potential growth could be volatile and requires balancing reforms,” they wrote. “This will reshape China’s role in the global economy.” The key risk — disposing of “zombie” state-owned companies — means the economy could be forced to adopt a zero interest policy, JPMorgan said.

SCMP: “The National Development and Reform Commission (NDRC), China’s top economic planner, has accelerated its review process and approved 27 infrastructure projects with a total expected investment of 1.48 trillion yuan (US$219.43 billion) since the start of 2018, of which 16 worth around 1.1 trillion yuan were approved since the start of November. Concerns were raised over a return to the debt-fuelled infrastructure investment binge that caused Beijing to halt approval of such projects in 2017, however, the need to stabilise the economy, which Beijing’s highest decision-making body set as the government’s top priority in July, took precedent.”

More empty cities on the way!

One Response to “More debt, more empty cities”

  1. feeblemind Says:

    Just a big jobs program I guess.

    They don’t seem to know what else to do.

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