New York Times: Why China’s Growing Debt Load Worries the World
Moody’s Investors Service downgraded its rating of China’s sovereign debt one notch on Wednesday, citing concerns over growing debt in the country, which has the world’s second-largest economy. In recent years, as China’s stunning economic performance of past decades has become difficult to sustain, the country has used debt to fuel growth.
Now, Moody’s says, China will have to borrow more and more to maintain the levels of economic growth the government wants. The concerns Moody’s raises will sound familiar to those who follow the Chinese economy closely. Expressed by one of the world’s top credit ratings agencies, however, the misgivings will be harder to ignore.
When it comes to pumping money into a financial system, China has made the Federal Reserve in the United States and the European Central Bank look almost lackadaisical. It has expanded its broadly measured money supply by more than the rest of the world combined since the global financial crisis. Now it has 70 percent more money sloshing around its economy than the United States does, even though the American economy is bigger.
China has accumulated its towering debt remarkably quickly. Goldman Sachs looked last year at how fast debt had accumulated relative to the size of the economy in 55 countries since 1960. It found that by the end of 2015, China was already in the top 2 percent of all credit expansions — and its debt shot up even higher last year. All of the other large expansions occurred in very small economies, some of which essentially lost control of their finances.
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WNU Editor: In the past decade this has become China's Achilles Heel .... and it is why President Trump's rhetoric on trade and investment is of deep concern in Beijing. But the problem is that maintaining a $400 billion positive trade balance with the U.S. is not sustainable for the U.S., and that other markets are nowhere big enough (or willing enough) for China to replace the U.S. with. So what is teh future .... like all countries that have lost control of their debt .... there will be a crash and correction. How big this crash and correction will be for China is still unknown .... but the repercussions on the global economy, China's relations with its neighbours, and within China itself .... will be profound. In the past the saying was .... if the U.S. sneezes, the world gets a cold. That same saying can now be applied to China .... but the geopolitical ramifications will be larger.
More News On Moody's Downgrade Of China
China's reforms not enough to arrest mounting debt: Moody's -- Reuters
China risks another downgrade if debt bubble not fixed, says Moody's -- The Guardian
China's Latest Default Flags Debt Concerns Raised by Moody's -- Bloomberg
Moody’s Downgrade Highlights China Fears -- CFO
Moody’s downgrade of China’s rating not fair -- Wang Yanhang, Global Times
Irritation with Moody's reflects China's sensitivity as it seeks foreign investors -- Reuters
4 Reasons Why Moody's Is Wrong About China -- Kenneth Kim, Forbes
Five views on Moody's downgrade of China -- International Adviser