Big risks of China's economy 2
Since 2008, the engine of China’s economic growth has been infrastructure and real estate spending (largely on borrowed capital), rather than consumption.
According to the Guardian, for local governments alone, loans have reached $3,000 billion.
China is having a headache solving the problem of bad debt and domestic demand.
However, last year, China decided to end the post-crisis period when it began to curb the credit bubble and stimulate consumer demand.
Meanwhile, Bloomberg cited a study released on May 8 by Oxford Economics showing that China’s bad debt could be about 10% – 20% of GDP, equivalent to 1,000 – 1,900 billion USD.
If China’s bad debt is really at the estimated level, this is very alarming.
Although seemingly exaggerated, these forecasts also make Chinese officials’ commitment to maintaining 7.5% growth this year appear fragile.
Many people are concerned that it will be difficult for China to control local government borrowing, and some state-owned enterprises are also starting to sink in debt and could collapse at any time.
In the worst case, China’s bad debt hits 3,000 billion USD, they still have nearly 4,000 billion USD in foreign currency in the Central Bank.
