Little by little, this notion that China is a rock of financial stability (at least compared to the US) is being chipped away.
Reuters (via hedgefundinvest) is reporting that the central government in Beijing is about to shift 2-3 TRILLION yuan ($308-$463 billion) in local debt to the Federal books.
Basically, local governments have borrowed like crazy, and there's been a fear of a massive wave of defaults, especially as revenue from real estate dries up.
Also there's no local bond market, so these are debts owed to banks, meaning that this bailout of localities is also a bank bailout (surprise!).
The expert on this issue is Northwestern poli-sci professor Victor Shih, who points out that China has been able to maintain the illusion of growth without government debt precisely through these local authorities.
Others have likened local governments to the infamous SIVs from the US financial crisis -- pockets of leverage hidden from public view.
Read more: http://www.businessinsider.com/china-to-bail-out-local-governments-2011-5?utm_source=dlvr.it&utm_medium=social&utm_campaign=moneygame#ixzz1Nz5P8krY
All information on this website is for educational purposes only and is not intended to provide financial advise. Any statements about profits or income, expressed or implied, does not represent a guarantee. Your actual trading may result in losses as no trading system is guaranteed. You accept full responsibilities for your actions, trades, profit or loss, and agree to hold MinKL Invest harmless in any and all ways.
No comments:
Post a Comment