Tuesday, October 3, 2017
"China is trying to juice its economy with even more debt" By Daniel Shane
China's economy is taking a big risk. By cutting the amount of cash they have to keep in reserve in banks. China is trying to improves its economy with even more debt. despite the already growing concern with its massive debt. An associate professor at the HSBC School of Business at Peking University in Shenzhen, Christopher Balding, believes this cut could lead to another $100 billion in lending. He said the cut "is clearly signifying additional concern about the sustainability of economic growth in China absent credit injections." A credit rating agency has warned many that strong credit growth was increasing economic and financial risks. The government has created an incentive to banks to lend money, specifically to small business and farmers, to become eligible to lower their reserves by the maximum amount. Many economic analyists fear that the conditions are unlikely to make much of a different in reality in terms of their overall economy.
http://money.cnn.com/2017/10/02/news/economy/china-economy-debt-central-bank/index.html
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ReplyDeleteAs I have always thought, China's growth seems rapid but very unstable at the same time. South Korea also had a very quick economic growth, but still has problems such as economy being way too centered on large corporations (hence relying too much on them) and issues on other factors such as education, pollution, etc. If we see how China deals with their dump of trash, it is absolutely atrocious. They should also work on these things and slow down their economic expansion. Everything seems too fast-paced and just concentrating on increment of figures, and I think the growth rate would seem very positive initially, but will not be very steady in the long run.
ReplyDeleteLeveraging growth with more debt and loaning out more cash seems very risky. In the crash of 2008 the banks loaned out too much money and didn't have enough in reserves and when the market finally crashed they were introuble because they didn't have any cash on hand to pay for things. If China continues to rapidly grow in this manner they are eventually going to crash. China is a world super power and if their markets crash it is going to be catastrophic for a lot of countries. More specifically China continues to buy up the United States debt and if China's economy is shaken the United States will be in big trouble.
ReplyDeleteThese indeed seems very risky for China to do. Although, the example that I can think of is the United States, which has suffered from debt for a very long time and it is only slowly decreasing. Once entering debt it is very hard to get out of. That is why this an extremely risky thing for China to do.
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