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Are Chinese Municipal $6 Trillion (40 Trillion Yuan) Hidden Debts Posing Titanic Risks?

October 19, 2018

Are Chinese Municipal $6 Trillion (40 Trillion Yuan) Hidden Debts Posing Titanic Risks?

The China Collapse trope is rearing its ugly head again. This time round, the spin is on China’s local government or municipal debts.

The latest narrative goes like this : local governments in China are estimated to have hidden debts of 40 trillion Yuan (or $6 trillion). Those hidden or undisclosed debts, together with outstanding municipal bonds and the Central government debts, “could have reached an alarming level of 60%”. The 60% debt to GDP ratio is hardwired in the Maastricht Treaty with a view to instilling fiscal and financial disciplines among the 28 member states of the European Union or EU 28 for short. The S&P report describes China’s hidden municipal debts as “a debt iceberg with titanic credit risks”!

Now, let’s unpack the opinion in the S&P report.

Estimates of China’s hidden municipal debts range from 8.9 trillion Yuan by Bank for International Settlements and 19.1 trillion Yuan by IMF to 23.6 trillion Yuan by Chinese Academy of Social Sciences and 47 trillion Yuan by Tsinghua University Taxation and Finance Research Institute. There are 8 different estimates by 8 different institutions, with the median value of 30 trillion Yuan. S&P didn’t explain or justify its choice of 40 trillion Yuan, which is close to the top outlier of 47 trillion Yuan.

Based on the median value of 30 trillion Yuan in undisclosed municipal debts, the total Central government (13 trillion Yuan) and municipal debts (including the disclosed portion of 16 trillion Yuan) stood at 60 trillion Yuan (about $9 trillion) at end 2017. That works out to 73 % of China’s nominal GDP of 83 trillion Yuan ($12.4 trillion) in 2017.

The 60% debt to GDP prescription in Maastricht Treaty is more honored in the breach. The average debt to GDP ratio of EU 28 by end 2017 is 81.6%. Even the EU discipline master Germany’s 64% exceeds the 60% limit! The financial situation in a handful of EU states is precarious, even parlous. Their debt to GDP ratio is not just alarming, but downright frightening :

…click on the above link to read the rest of the article…

Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse  China of Debt Trap Diplomacy

October 16, 2018

Lies, Damn Lies & Statistics: How the US Weaponizes Them to Accuse  China of Debt Trap Diplomacy

With China and Russia named as the two greatest threats to continuing American hegemony end of last year, the velvet gloves have come off the Washington establishment, baring their knuckles against the Middle Kingdom in plain view of the entire world. In recent weeks, anti-China rhetorics and vitriol emanating from the Oval Office and Capitol Hill have reached feverish, even hysterical, proportions.

The total warfare on all fronts is being waged against Beijing, assisted and amplified by the corporate media. The empire’s propaganda machine is in overdrive, churning out fake news and lies on a 24/7 basis to smear and demonize China. One of such lies is the alleged neo-colonization of developing countries through debt traps sprung by China.

This article puts together all the numbers in four countries – Sri Lanka, Pakistan, Maldives and Malaysia – which are misrepresented by the western press as victims of China’s “debt trap diplomacy”.

SRI LANKA

Lie : Western media have spun tall tales that Sri Lanka, with Chinese loans up to its eyeballs, used 90% of government revenue to service Chinese debts and was forced to “cough up a port” to Beijing.

Fact : China accounted for only ONE-EIGHTH of Sri Lanka’s $65 billion debts. Beijing didn’t demand immediate payment of loans falling due from Colombo. Instead, China acceded to Sri Lanka’s request to restructure the loans. Colombo OFFERED to settle the loans past due by giving a 70% equity in the LOSS-MAKING Hambantota port to a Chinese company. To bring the port up to the operational level, the Chinese company has to spend another $700 million. No competing offer from other parties to take over the port was received before and after the restructuring proposal was completed.

…click on the above link to read the rest of the article…

Not All Quiet on South China Sea

October 11, 2018

Not All Quiet on South China Sea

Photo Source Official U.S. Navy Page | CC BY 2.0

The near collision last week between a US warship and a Chinese destroyer in the Spratlys was more than two naval powers playing cat and mouse on the high sea. The incident came hot on the heels of Trump and Pence accusing China of meddling in US midterm elections, America slapping sanctions on China’s defence procurement unit and its head for buying S-400 air defense system from Russia, wild allegations that China interned more than one million Uighur Muslims in Xinjiang, and the intensifying Sino-American trade war.

Such vitriol coming thick and fast from Washington perturbs and angers Beijing, even though China was the preferred scapegoat and whipping boy in past American hustings. What is different this time round is the total and full-frontal assault on the People’s Republic since the National Security Strategy report in December last year named Beijing, along with Moscow, as the foremost threats and adversaries to Washington. Already, the venom and viciousness spouted by Washington against China in recent weeks have far surpassed that directed at Russia.

America’s Unipolar Moment was well and truly over when Russia regained Crimea after the US-orchestrated coup against the democratically-elected Ukrainian President Viktor Yanukovych in 2014. Cold War 2.0 began in earnest when Moscow sent troops to Syria in September 2015 at the request of President Assad to help Damascus fight against ISIS terrorists sponsored, trained and armed by the US. The new Cold War expanded to include China late last year after the National Security Strategy report.

It’s against such backdrop and in such geopolitical context that the recent incident in the Spratlys should be viewed. China’s patience and tolerance with almost monthly freedom of navigation patrols or FONP by the American Navy has been tested to the limit.

…click on the above link to read the rest of the article…

Will World Trade Collapse After America Withdraws From WTO? Don’t Bet on It!

September 7, 2018

Will World Trade Collapse After America Withdraws From WTO? Don’t Bet on It!

With Trump slapping tariffs right, left and center on friends and foes alike, and threatening to withdraw America from WTO, concerns about declining global trade have heightened. Trading nations like China and Japan are wary and worried about the prospects for world trade, as are developing countries in Asia which have embarked on industrialisation and look to foreign markets for their manufactured goods in addition to their traditional agricultural produce.

The threat to growth in world trade didn’t begin with Trump’s “America First” policy. Way back in 2008 when the WTO Doha Round broke down on liberalization of agricultural trade, many already saw the writing on the wall. Countries in East Asia started to negotiate and enter into bilateral and regional FTAs.

The most significant FTA concluded in the new millennium in Asia was between the 10 member states of Association of Southeast Asian Nations (ASEAN) and China, dubbed ACFTA. China and ASEAN have a combined population of 1.9 billion and aggregate nominal GDP of almost $16 trillion in 2017 or 22% of global total. ACFTA is the largest trade grouping in terms of headcount, and the second largest measured by GDP, which ranks a close second to NAFTA’s 28%. After ACFTA came into effect in 2010, China’s  bilateral trade with ASEAN members soared from under $200 billion in 2009 to more than half a trillion dollars last year, a whisker shy of China-EU trade of $540 billion, and a fifth less than China-US trade. Close to 90% of products are transacted at ZERO tariffs under ACFTA.

Earlier this year, all the TPP signatories sans the US agreed on a slightly modified version of TPP called CPTPP with a combined GDP (excluding America’s) representing 13% of the global total.

…click on the above link to read the rest of the article…

Olduvai IV: Courage
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Olduvai II: Exodus
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