Infrastructure, trade deal, etc.

Asian Review:

The Chinese government has set its 2019 growth target at 6% to 6.5%. Many economists believe it will implement additional stimulus measures if the economy continues to lose pace. Cheng Shi, chief economist at ICBIC, thinks regional governments will issue more bonds to finance infrastructure projects and introduce incentives to spur personal spending on automobiles and other items.

Iris Pang, greater China economist at ING Bank, expects stimulus spending to double from the previous estimate of 2 trillion yuan to 4 trillion yuan ($295 billion to $590 billion), mainly in the environment and transportation sectors.

Kenny Wen, a wealth management strategist at Everbright Sun Hung Kai, calls the trade talks the biggest variable for the second half of 2019. He said there is a 55% likelihood that Beijing and Washington will reach some kind of consensus by the end of the year. If negotiations break down, he said, “financial markets would become volatile and the economic slowdown will pick up pace.”

“If there is no deal,” said Sean Taylor, chief investment officer for Asia Pacific at DWS, “we could expect: 1) Chinese exports to shrink further; 2) export oriented companies would lay off more employees. The growth rate will fall to around 5% and China will fall into a serious economic crisis.”

The WSJ piece we quoted extensively from leads us to a different conclusion from saying infrastructure spending and a trade deal will fix things. When you

– increase debt 4x to 3xGDP in a mere decade to $40 trillion,
– have company bankruptcies increasing 2x to 18,000 in a single year, 2018,
– bond defaults increasing 5x in four years and 2019 getting worse,
– the failure last month of a tiny bank causing “panic that spread into money markets”

and so forth, you have systemic problems – none of them caused by the so-called “trade war” BTW. Hang on; it could be a rough ride.

One Response to “Infrastructure, trade deal, etc.”

  1. feeblemind Says:

    Is it known how much of this debt is held by foreigners?

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