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10 matches for " bad debt":
In our daily Monitors we've talked about the four paths that we see for the Chinese economy over the medium-to-long term. First, China could make history and actively transition to private consumption-led growth.
In yesterday's Monitor we set out how government will have to prepare for an increase in debt issuance both to bring debts on-balance sheet and also to issue new debt as government is obliged to run deficits while the corporate sector deleverages.
We've argued for some time that China faces a massive legacy of bad debt that will either have to be dealt with, or will result in the Japanning of its economy.
In the yesterday's Monitor, we presented an exagerated upper-bound for China's bad debt problem, at 61% of GDP. The limitations of the data meant that we double-counted a significant portion of non-financial corporate--NFC--debt with financial corporations and government.
China's total debt stock is high for a country at its stage of development, relative to GDP, but it is sustainable for country with excess savings. China was never going to be a typical EM, where external debtors can trigger a crisis by demanding payment.
Industrial profits in China dropped 3.7% year-over- year in April, after surging 13.9% in March, according to the officially reported data.
In yesterday's Monitor, we laid out how conditions last year were conducive to Chinese deleveraging, and how the debt ratio fell for the first time since the financial crisis.
China's money and credit numbers for April were a mixed bag. M2 growth merely inched down, to 8.5% year-over-year, from 8.6% in March, keeping its gradual uptrend intact.
We have recently looked at China's capacity to grow its way out of the debt overhang--see here--and whether last year's deleveraging can be sustained; see here.
Following this week's 25bp Fed hike, the PBoC hiked the main interest rates in its corridor by... 5bp. The move was unexpected so the RMB strengthened modestly; commentary is full of how this means the deleveraging drive is serious.
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