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IN DEPTH: China Struggles To Manage and Address Its Debt Levels
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China Struggles To Manage and Address Its Debt Levels

By Anthony

BT 201707 IN DEPTH 01 编辑      我国债务水平一直是国内民众、企业乃至外国人士共同关注的问题,就在今年3月10号的北京记者会上,中国央行“人民银行”行长周小川表示:中国非金融企业的杠杆率太高。对企业债务水平,特别是那些杠杆率已经过高企业的债务水平,必须加以控制;并敦促负债率高的企业直接融资,或进行市场化债转股等。他还建议,要解决企业负债率高的问题,这些企业需要进行内部改革,金融系统不能过多地持这类高负债企业,而应该鼓励企业直接融资。此外,有些企业可能需要进行市场化债转股改革。

      大概是由于中国“世界工厂”的地位,,中国能很明显地感受到信贷衰退和国际贸易放缓的脚步。目前中国已经采取行动解决危机,包括整顿过热的房地产市场和投资市场。但是制造业、房地产和原材料生产投入紧缩,经济也明显大幅放缓。2017年的GDP总体预测已经从6.8%下降到了6.5%。中国经济的故意冷却也是担心经济发展太快而采取的常见策略,但是无论如何这都无法消除中国债务,而只是尽量减少新债务积累。

      此外,中国目前已经从出口经济向消费转型,制造业和投资的放缓将同时增加消费水平。虽然四月数据显示零售和服务业增长比上年下降,但是“一带一路”将更多投资项目交给了其他发展中国家,这往往比投资给发达国家的风险更大。

      虽然债务是一个令人困扰的难题,但是不得否认债务是每个经济体增长的重要组成部分,而且说中国债务将导致经济崩溃也是不恰当的。早在去年6月时,国务院新闻办公室就曾在国务院新闻办新闻发布厅举行吹风会,请中国社会科学院学部委员、国家金融与发展实验室理事长李扬介绍中国债务水平等相关情况,并答记者问。在会上,李扬表示,中国政府债务水平达到56.8%,低于欧盟的60%的警戒线,因此它不属于风险非常高的状态: “2015年末纳入预算管理的中央政府债务10.66万亿,地方政府债务16万亿,合计政府债务26.66万亿,占GDP比重为39.4%。如果把地方融资平台加进来,以更宽的口径估算,政府债务水平达到56.8%”

      此外,中国已有很多机制防止长期经济危机以及为减轻债务压力采取的步骤。如果出现危机,中央还可以通过注资、市场法规和债务重组来抢救市场,避免危机加剧。

BT 201707 IN DEPTH 04Much talk has been devoted to the issue of China’s debt and whether or not it is sustainable in the long-term or if there will be a proverbial day of reckoning in which the country will inevitably face serious headwinds for the spending and investment spree it has taken over the past several decades. The degree to which this debate has been muddled by speculative forecasting is noteworthy enough to make dismissal of the negative impacts of an over-indebted economy difficult to ignore. Furthermore, the degree to which China is in the midst of a ‘debt problem’ is also debatable (Barron’s just put out a note suggesting China’s debt is not problematic). According to several statisticians, China’s debt level is around 40 percent of its gross domestic product. While this number is not necessarily large compared to the United States’ or Japan’s, the quality of debt is important to take into consideration as well.
 

Overall, this aspect of China’s debt is impossible to determine considering the opaque nature of state-owned enterprises, provincial balance sheets and even to a degree private corporate entities. What can be calculated is the way in which the country is collectively coming to the conclusion that it is an issue that needs to be considered in weighing future economic decisions. The People's Bank of China Governor Zhou Xiaochuan recently suggested that "non-financial corporate leverage is too high" and should be clamped down on.
 

Yet, it is not as though China has been ignoring the buildup of debt since the 2008 Financial Crisis which caused the global economy to suffer a significant blow to its growth. China especially felt the brunt of drying up of credit and slowdown of international trade, primarily because in many ways it was then as it is now the world’s factory. Actions have been taken to tackle these issues. These efforts include pledges to restructure non-performing state-owned enterprises, withdrawing financial support from so-called “zombie” firms and a reduction in what is now being referred to as excess capacity. Unfortunately, pledges are not always followed through with. In spite of this, actions have been taken to address the question at hand including tampering down on domestic investments and the overheated property market.
 

BT 201707 IN DEPTH 02
Of course, these actions have come with some drawbacks as well. Since the clamping down on investment in manufacturing, real estate and raw material production, the economy has significantly slowed. The forecast of 2017’s overall GDP has already been downgraded from 6.8 percent to 6.5 percent which is down from 2016’s 6.7 to 7 percent growth target. Meanwhile, some economists suggest China’s GDP is actually somewhere between 0 and 2 percent, but these figures are too difficult to confirm. Regardless, China’s economy is purposefully being cooled down which is a common tactic among economists worried of an economy that is accelerating too quickly. Either way, this will not completely eliminate China’s debt but instead just minimize the amount of new debt being accumulated.

hl in depthFurthermore, the problem with the current path that China is on remains in transition from an exporting/investment economy towards consumption and innovation. Ideally, the slowdown in manufacturing and investment will coincide with increased levels of consumption, yet April’s economic data showed that growth in retail sales and services fell from a year prior. On top of this, the ambitious One Belt One Road (OBOR) project completely counteracts this notion of making risky investments as nearly all of the infrastructure investment money will be given to developing countries. This tends to be much riskier than to lend to developed countries since 30 percent of the main financing institution of the OBOR project, the Asian Infrastructure Investment Bank, is from China.
 

BT 201707 IN DEPTH 03
Either way, China cannot afford a long economic crisis like the United States or Europe suffered in 2008 or a lengthy and mediocre recovery like the United States and Europe have been enduring over the past eight years. Because of this, China is in somewhat of a Catch-22 situation; risky investments and debt must be clamped down on to avoid crisis but to avoid a crisis, debt and risky investments must be increased. Such is the dilemma facing Chinese macro-economic decision makers.
 

BT 201707 IN DEPTH 05Nonetheless, an important aspect of the debt debate is the recognition that debt is an important part of every economy’s growth; it is impossible for any country to operate or have significant growth without a significant amount of national or provincial debt. Furthermore, a convincing argument from several important figures such as Premier Li Keqiang have argued that the country’s large degree of reserve currency would provide an ample amount of room for the country to react to any financial calamities that may occur if a debt crisis were to spiral out of control and begin to negatively affect equity and credit markets. In spite of all this, large degrees of debt can spiral out of control if not properly structured and delimited with creditors and synchronized in conjunction with the global economic environment, unrestricted market forces and an accurate reflection of local economic demand. That is to say, expansion via debt-fueled growth is oftentimes necessary, but doing so blindly will lead to economic calamity such as the issues facing the industrial town of Zouping as reported by the New York Times.
 

That said, it is far from certain that China’s debt could lead to an economic collapse. Several mechanisms are in place to prevent a prolonged economic crisis and the steps that have been taken to alleviate the debt pressure. Again, China’s large degree of currency reserves could be allocated towards non-performing loans, high risk loan pools or faltering state-owned enterprises that only need a limited degree of capital injection. Such was the case with several large companies in the United States during the height of its economic woes in 2008 such as General Motors, AIG and nearly every financial institution.
 

In the end, there is little doubt that if a crisis were to come to head in an unforeseen exponential manner, central authorities would likely come to the rescue with capital injections, market regulations and debt restructuring to avoid a deepening crisis. Regardless, it is not entirely a foregone conclusion that this will be the case either. In sum, it is better to avoid long-term and sustain risky investments for the sake of more reasonable economic growth levels which is what seems to be the current path at the moment, at least in the domestic scenario.
 

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