Tags: us | China | debt | spending

FT: China Is a Debt Sinner, Too

Monday, 15 Aug 2011 08:53 AM

China, the largest U.S. creditor, has criticized Washington for running up debts, saying Americans can kiss goodbye the good-old-days of spending their way out of their messes.

Beijing, however, has run up some debts of its own — and more than many might think.

The Chinese central government’s declared gross debt was only about 17 percent of gross domestic product at the end of 2010 — tiny when compared with the debt-to-GDP ratios for the 87 percent in the U.S. and 80 percent in the U.K., the Financial Times reports.

A look at China’s real debt situation paints a different picture, especially when considering how the country spent during a recent construction boom and how the central government is ultimately responsible for debt held in special financing vehicles, according to the GaveKal-Dragonomics economic research firm.

“By including a range of other liabilities that Beijing is explicitly or implicitly on the hook for — such as ballooning debt at the railway ministry, bonds issued by so-called policy banks that lend on behalf of the state, and bad debts in the state-owned banking system — GaveKal-Dragonomics estimates that China’s real debt-to-GDP ratio could be as high as 90 percent,” the Financial Times writes.

Analysts at ratings agencies — those that are keeping a keen eye on U.S. debt levels — admit China is not the fiscal saint it claims to be.

“Even though headline sovereign debt levels are low in China, so much quasi-sovereign activity happens through the banking system that if you include some of those contingent liabilities, the number can get very big,” says Charlene Chu, head of Fitch’s China Bank Ratings.

China continues to lecture the U.S. for its debt levels.

The Chinese Central Bank says that the U.S. faces “debt sustainability” risks in the medium- and long-term, Bloomberg reports

“Developed countries’ debt problems are worrisome” and may restrain a longer-term global recovery, the People’s Bank of China says in a quarterly monetary policy report, Bloomberg adds.

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China, the largest U.S. creditor, has criticized Washington for running up debts, saying Americans can kiss goodbye the good-old-days of spending their way out of their messes. Beijing, however, has run up some debts of its own and more than many might think. The...
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Monday, 15 Aug 2011 08:53 AM
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