{"id":380433,"date":"2010-03-02T12:37:00","date_gmt":"2010-03-02T17:37:00","guid":{"rendered":"http:\/\/www.businessinsider.com\/suddenly-everyones-waking-up-to-chinas-huge-public-sector-debt-2010-3"},"modified":"2010-03-02T12:37:00","modified_gmt":"2010-03-02T17:37:00","slug":"suddenly-everyones-waking-up-to-chinas-huge-public-sector-debt","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/380433","title":{"rendered":"Suddenly, Everyone’s Waking Up To China’s HUGE Public-Sector Debt"},"content":{"rendered":"

\"beijingWe covered this in February<\/a>, but suddenly there’s a surge in interest in China’s public debt situation.<\/p>\n

Wha? Public debt in China? Don’t they have trillions and trillions of foreign exchange reserves?<\/p>\n

Well, yes, but…<\/p>\n

As Northwestern Professor Victor Shih has been arguing, city and state debt is substantial — so, substantial, in fact that a bailout of these regional governments could require a bailout that uses much of the country’s forex.<\/p>\n

Bloomberg<\/a>:<\/p>\n

China’s hidden borrowing may push government debt to 96 percent of gross domestic product next year, increasing the risk of a financial crisis in the world’s third-biggest economy, Professor Victor Shih said.<\/p>\n

“The worst case is a pretty large-scale financial crisis around 2012,” said Shih, a political economist at Northwestern University in Evanston, Illinois, who spent months researching borrowing transactions by about 8,000 local-government entities. “The slowdown would last at least two years and maybe longer,” the author of the book “Factions and Finance in China” said in a phone interview March 1.<\/p>\n

This story will probably stay way below the radar for a long time. It’ll be when the first local government needs a bail out that people will start paying attention to this time.<\/p>\n

Join the conversation about this story »<\/a><\/p>\n

See Also:<\/b><\/p>\n