Either that, or it has simply deferred it. Remember that was once said about the US too.
Complexity is hard to tame and prone to punctuated equilibrium. If you eliminate the complexity, you end up with brittleness, which is prone to catastrophic failure.
One difference between your analysis and the Economists is that nobody will remember a hacker news comment that was proven wrong.
China can just do whatever, whenever. If they need to break up Evergrande, nationalize it, take its assets, censor the media, send their execs to gulags forever. They just do it.
Sadly, I fear this is the inevitable direction, especially since it looks to be a last govt standing kind of situation.
Its easy to stave off the bust if you just swipe your credit card to solve the problem and kick the can down the road. But the general assumption is that eventually, your country's debt becomes untrustworthy because of all the shenanigans you pull.
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I think the world markets have shown a need for "safe" bonds, aka government-secured bonds. So I'm sure foreign markets are still willing to buy Chinese debt up. There's also the issue of looking at your competitors (USA, Japan, Germany, etc. etc.), and other market conditions (if everything is overvalued in the stock market, then people buy bonds because they see it as a "less bad deal").
Eventually, the pool of debt and money will stop. It is a finite resource.
China AS A NATION is about 270%. The USA's is about 335% if my quick googling serves me.
1 https://tradingeconomics.com/country-list/government-debt-to...
One thing all markets at their very peak have in common is the widespread belief that the business cycle has finally been conquered. Whether that's the "permanently high plateau" of the 1920s or the "new economy" of the late 1990s.
Remember "The Maestro?" Alan Greenspan was the guy who knew what was what and kept the economy humming.
How is he viewed now?
Same story, different actors. I doubt that any of these notions are true:
1. All of the information about Evergrande is out.
2. Half of the information that is out is accurate.
3. The CCP rescue actions will not re-inflate the bubble.
I'm not even sure if the money multiplier effect even happens in China, or if it's 100% reserved. It's a bit hard to get information about Chinese banking regulations in English.
Gordon Brown made this claim about the UK back in 1997. 10 years later he became Prime Minister just in time to see this claim put to the test.
This is only true at the national level.
Cities, provinces, and large companies (if large enough, act as tentacles of the government) are incredibly indebted and much of it is foreign.
More than that, China has a lot of foreign debt denominated in US dollars so any spike in inflation will massively hurt.
What economic function does a boom or bust perform, and why doesn't China need those functions?
I guess you can smooth them out a lot and limit the human impact. To a large extent, that's been done many places. People in the US don't normally starve because of a recession.
To a controls engineer, oscillations are indicative of bad feedback tuning.
Someone will eventually tell you "You're a good boat builder, but stop building boats, go learn to make fishing nets instead". That's a bust, even though growth is still happening.
If you are using western accounting methods, it might look like things stopped growing and reversed (negative gdp growth), because you thought last year that the boats were more valuable than they actually are, but there are still more boats, it's not like the accountant destroyed them.
So a bust doesn't mean destruction, it's just a realignment of resources and a realization that what you had wasn't as great as you hoped.
The oscillations are related to feedback delays and how conservative you are about overbuilding. Basically, debt is what feeds a boom/bust. If you wait for your previous boat to be sold before you build a new one, and if buyers wait for the last boat to pay for itself before they buy a new one, then there is no boom/bust.
You can tune the feedback, and that's badically what lenders are supposed to try to do. In practice, policymakers need to be involved as well, because lenders won't do that great a job because they aren't lending their money. Maybe China has a different way of tuning. But basically, debt is the mechanism of boom/bust, and China has a lot of it, so it's hard for me to believe that it is somehow conquered. Good for them if they are better at tuning it, but it's not clear that they are better, and certainly not so good that they've eliminated all the oscillations.
Part of the issue is that cheap debt lets a company like Evergrande, or even an entire sector, pretend that it's growing even when it's no longer producing things of value.
When debt is cheap, I can keep building boats by borrowing money, and even when they fail to sell, I can point to my growing inventory of unsold boats and borrow more money against that to build even more boats. This can basically keep going until someone asks for their money back and nobody else will lend me more. That's when we find out whether the boats are truly worth what I say, and whether the growth was real. Until that point, the fact that the boats are worthless can be disguised. It's even worse if I'm selling the boats to customers who buy up my inventory at rising prices but never sail them, just because they're so confident in the trend of their future value going up. Then even I might not realize that my boat factory is no longer building useful items.
I agree that a bust doesn't mean destruction. The waste already happened, in the long stretch of time where I kept building unnecessary boats. But smoothing out the cycle (and accurately pricing debt) may mean that discovery happens sooner, the pivot to nets happens earlier, and the roller coaster ride is avoided.
Right now I'm watching this happen, not in China, but in Canada where cheap debt is blowing a monstrously huge bubble in the housing market. An absurdly wasteful amount of capital is getting redirected into shuffling land titles back and forth, based on loans and valuations that continue to increase.
Canada is on a path to eventual heartbreak of one sort or another, and to the extent that monetary policy can influence it, the choice is either a large collapse now or an even larger collapse later. I can see that China is in a similar position, and they've chosen a large collapse now rather than procrastinating.
In a feedback controller, we cannot completely eliminate sensitivity to disturbances, but we can move it from one band to another, like a pile of dirt.
It's clear that China has not eliminated the oscillations in their economy, but this is one good example of scooping the summit off of a future mountain of pain, and paving it into the valley of the present.
Debt is one mechanism of boom/bust; another is moral hazard. If lenders are confident that their "risky" loans are de facto guaranteed, they won't price their debt accurately. Here we have government ministers saying that even a 10% correction in the price of housing must not be allowed to happen because innocent homeowners would lose their shirts, and you can bet they'll see to it that we can take on more debt to keep bidding up those boats. In times like this, I do respect the CCP's willingness to look past the short term pain.
Boom and busts do not perform a function. They are a symptom of a rigid money system.
If you put a thermostat on a heater that can only go on or off then it will overshoot or undershoot the target temperature in a cycle. If the heater is perfectly flexible and instantly responds to the current temperature then no cycles will occur.
If China doesn't experience any booms or busts then it either means their economy is in a range that suits their existing money system well or they simply are better at managing their money system.
While they could bail this out with the printing presses it's really a symptom of the underlying problem and that can't be handwaved away.
Do you have any books to recommend on China's financial system to help give perspective alternative to western default take?
* Is Evergrande an isolated case of "Ponzi finance" (taking money from new customers to pay interest to old customers), or just the tip of an iceberg? How many other Evergrandes are there in China? To what degree has uneconomic lending and investing underpinned the Chinese economy over the past three decades?
* If the mass of Chinese consumers who lent to the Evergrandes of China get stiffed, how will their behavior change? And how will that impact the Chinese economy?
* If foreigner lenders get stiffed, how does that affect credit markets -- in China, in Asia, and everywhere else?
China doesn't have boom bust cycles because:
1. It has little foreign debt.
2. It has a trade surplus.
3. It prints money to bailout any internal bad loans. It does this politically by picking and choosing winners and who gets bailed out, usually with foreigners getting stiffed.
4. Its bank bailouts do not require issuance of new debt or taxpayer austerity.
5. Banks do not all collapse at the same time because they get fresh new printed money to lend.
6. Anyone at the bank who takes advantage of that moral hazard to lend outside of guidelines gets executed.
7. The banks have very detailed guidelines for how they are to lend such that they are more or less partially privatized central planning.
8. The government regularly issues guidelines to preemptively crush bubbles on purpose by restricting lending to overheated sectors instead of across the entire economy via raised interest rates.
I am not a big fan of the CCP, but their financial system is impressive. That system, by design, has conquered the boom/bust cycle, but western observers refuse to believe this because they are so throughly bought into the architecture of the western financial system and the many billions of words written on the topic of the operation of that system which is based on very different rules that they cannot imagine it could work any other way.