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China's reforms not enough to arrest mounting debt: Moody's

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Propaganda is not the sole domain of the West.

-1 ( +2 / -3 )

China has managed to avoid financial crises that dogged Japan and the West. That is despite China having an overheated property market for quite a few years, plenty of private debt and stock market crash.

The Einsteins at Moody's (who gave triple-AAA ratings to toxic subprime debt securities back in the day) might want to ask themselves why.

2 ( +3 / -1 )

West invented it. East copied it.

Actually, it was invented in the Middle East over 2 millennia ago but let's not quibble. Personally, I have no wish to see anyone's economy crash. But there does need to be a radical overhaul - globally - where the rich stop shafting the poor and the gap decreases, rather than widens.

1 ( +2 / -1 )

"China has managed to avoid financial crises that dogged Japan and the West. That is despite China having an overheated property market for quite a few years, plenty of private debt and stock market crash"

And when you say DESPITE, you mean BECAUSE. If you bother to read the article, you will see that Moody's concern, and everyone else's, is that China has addressed every problem with more debt. Need some growth? Here is some debt. Too much debt? Here is a swap... so we will take your debt and you can take on more debt. Stock market down? Here is some debt. Want a third home? Here, have some debt.

And none of those underlying problems has been solved. It has been papered over with loan agreements. That is really the point. Moodys is simply saying that all that debt that has been thrown at OTHER problems is creating a problem that is not being addressed.

The article includes one more gem: "shadow banking." Oh wonderful. So in addition to the official debt figures, we apparently have a large debt market that is wholly off the books.

But no, everyone says it must be Moodys that is the problem. Moody's has been around longer than China's "new economy." They have seen this thing over and over again.

-3 ( +1 / -4 )

It is Moody's that deserves a credit rating downgrade. It proves itself woefully incompetent and conceivably criminal for their role in the 2008 housing crash---which is bandaged with even more debt and QE. Moody's has lost all of its credibility and their assessments should be taken with a grain of salt.

3 ( +3 / -0 )

@5SpeedRacer5

"The article includes one more gem: "shadow banking.""

And you forgot to read beyond that:

"Regulators have issued a flurry of measures to clamp down on the shadow banking sector while the central bank has gingerly raised short-term interest rates."

This is what Japan in the bubble and the US in 2008 failed to do...until it was too late. The regulators sat on on their hands while viewing the speculation and sleaze as a glorious manifestation of the market doing its job. The Politburo in Beijing takes a different view all together, to their credit.

0 ( +2 / -2 )

Japan never had a shadow banking system in the first place.

China is not doing anything about their zombie SOEs and pumping frantically into useless infrastructure projects to maintain their growth but at the end there is going to be a point where it is going to give and when that happens the so called China dream is going to burst with all the wealth with it.

-4 ( +0 / -4 )

Japan never had a shadow banking system in the first place.

Yes it did. In the leadup to the bubble, the sarakin industry was largely run by the yakuza who used revenues for shady purposes and intimation and violence against borrowers. Regulators knew but did nothing.

Zaitech was another example of uniquely Japanese sleazy finance. There are many others. The regulators were aware of these things but did nothing...until after the crash, or as I like to call it, "Yamaichi Shock." LOL.

2 ( +2 / -0 )

JeffLee

Looks as if you don't even know what shadow banking is. It for corporations entities not individuals. Banks in China are capped in the total amount it lends to companies so companies raise money from individuals providing higher return rate than placing into the bank.

It's like corporate bonds but much shorter terms like six month.

The problem is the money is basically off the books so it does not show how the actual financial situation of those companies.

As for zaitech it's basically corporate investments that was not their main focus of business like purchasing masterpieces, A&M of foreign companies, etc.

They had mixed result but definitely not what you call "sleazy".

-2 ( +0 / -2 )

@Triring

Looks as if you don't even know what shadow banking is.

That's a comment I direct at you. Your definition is outdated and narrow.

The Economist: "Today, the term is used more loosely to cover all financial intermediaries that perform bank-like activity but are not regulated as one."

http://www.economist.com/blogs/economist-explains/2016/02/economist-explains-0

Japan's shadow banking industry is worth around 5 trillion dollars, according to the Financial Stability Board (2015).

http://www.fsb.org/wp-content/uploads/global-shadow-banking-monitoring-report-2015.pdf

2 ( +2 / -0 )

Who monitors the Ratings Agencies ?

2 ( +2 / -0 )

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