China plans to boost government debt to help reduce the load of business debt, but don’t expect any sudden changes. The country’s total debt is 2.5 years of GDP and is expected to grow to 3 years of GDP in the next four years despite incremental policy changes. The high levels of business debt in China are worrisome to ecoomists, and debt is growing faster than the economy is growing, leading some to describe the Chinese economy using colorful phrases like “debt-fueled binge.” While the problem is obvious enough, the solution is not, and policymakers are taking a cautious approach.
Monday, May 23, 2016
Thursday, May 5, 2016
Is China borrowing too much for unneeded make-work projects? That’s the opinion of a Wall Street money manager, Stanley Druckenmiller. The CNNMoney story by Matt Egan:
China is in the midst of an "extremely rare and quite dangerous" explosion of debt, argued Druckenmiller, whose fortune Forbes estimates at $4.4 billion. He compared the situation with "subprime mania" in the U.S. . . .
He specifically warned about an overhang of real estate development in China.
As for the U.S., Druckenmiller worries that persistent low interest rates have created a speculative bubble in securities, with the Fed now stuck in a position of trying to prevent a near-term global stock market crash.