Friday, June 2, 2017

Steve Wang — Leverage, zombies, unaffordable homes…


Chinese economic reform.
While much attention has been given to the curious coexistence in China of excess capacity with insufficient supply, this is just a superficial symptom of the challenges facing the economy. The root of the problem, Zhu said, is the failure to let market forces take their full effect. This enables all manner of twisted policies and bureaucratic arrangements to flourish, sending price signals haywire and blocking the free flow of basic elements in the system. In sum, it is this that created the misallocation of resources we see in China today....
The Chinese authorities are walking a tight rope on reform. Too much reform too quickly can lead to instability, while too little too slow can lead to stagnation, or worse if debt cannot be serviced.

Asia Times
Leverage, zombies, unaffordable homes…
Steve Wang

6 comments:

Bob said...

When even the tightrope is a commodity, then yeah.

Andrew Anderson said...

The root of the problem, Zhu said, is the failure to let market forces take their full effect.

And part of that problem is the largely sham liabilities of the banks toward the non-bank private sector.

Sham liabilities = sham accounting = unjust, unstable system.

Andrew Anderson said...

Genuine liabilities toward the non-bank private sector means the banks would have to be careful or be ruined by bank runs.

And why should we care if banks are ruined anymore than we care about losers in Las Vegas?

It's an unholy mess we have where what should be inherently risk-free deposits are instead used to lower, in a crooked way*, the borrowing costs of the banks and the so-called credit-worthy.

*Crooked and unnecessary since interest rates can be lowered by equal fiat distributions to all citizens and other ethical means.

Ryan Harris said...

Tom, Watch carefully the Anbang Insurance debacle unfold. Their funding has been cut, access to banking nil. One person has been arrested.

The people behind Anbang are Deng's successors. I think his pragmatic, "whatever color of cat," wing of the communist party fell out of favor with Xi's liberal western reformers.

Tom Hickey said...

Xi was serious when he said that he was going after the tigers as well as the flies. A number of high ranking officials as well as wealthy business people have been prosecuted as a result of the anti-corruption drive.

Of course, the West spins this as purging enemies, while corruption runs rampant in Western countries at the top level to the degree it has become obscene.

Tom Hickey said...

Caixin
Is Taking a 100 Million Yuan Bribe the New Ticket to a Life Sentence in China?Is Taking a 100 Million Yuan Bribe the New Ticket to a Life Sentence in China?
Cui Xiankang and Li Rongde

Caixin has Anbang in its sights.