Tuesday, May 31, 2016

Debt Strategy

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

Fiscal Push to Keep China Going

While not increasing government budgets, China will accelerate spending and make an effort to fully spend local government budgets in an effort to boost the economy in the next two quarters.

Thursday, May 5, 2016

A Warning on Debt Troubles

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.