Oct

21

 So I was looking at statistics around China and noticed a couple things.

Chinese GDP has reportedly over tripled since 2006 while Chinese markets in dollar terms are only up 40%. In the meanwhile the US markets have doubled while GDP is up only 40%.

Has all the growth been in the private sector? Have earnings been secretly paid out to the party? Or are the GDP numbers likely false? Or something else entirely?

Books/articles on the subject would be appreciated!

anonymous writes: 

Chinese GDP is tricky. There are 2 Chinese economies–the state economy and the private economy. The private economy follows short boom/bust cycles like the US economy in the 70’s/80’s, overall grows healthily but with high volatility and high frequency. The state economy is where the zombies are.

The PBOC believes that Chinese NPLs are effectively in the 15% range. They calculate this by counting all debt >180 days past due as delinquent, but crediting back about 20 cents on the dollar, because delinquent bank debt can be auctioned off to private investors at around 25c on the dollar.

Chinese gross debt is 250% of GDP. 15% of all debt as bad debt equals 37.5% of GDP. This was also true of other countries like Japan where for cultural reasons bad debt is not called bad debt.

Additionally, the bad 37.5% debt has grown at faster than the economy rate, as the private economy’s growth rate has slowed down and the government has effectively leaned harder on the bloated state sector to hit headline GDP growth numbers.

Michael Pettis has blogged a lot about this if you want to read the much longer academic version of this thesis.


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