{"id":27821,"date":"2017-11-09T21:47:18","date_gmt":"2017-11-10T02:47:18","guid":{"rendered":"http:\/\/olduvai.ca\/?p=27821"},"modified":"2017-11-09T21:47:18","modified_gmt":"2017-11-10T02:47:18","slug":"perpetual-notes-chinas-new-way-to-hide-debt-call-it-equity","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=27821","title":{"rendered":"Perpetual Notes – China’s New Way To Hide Debt (Call It Equity)"},"content":{"rendered":"

Perpetual Notes – China’s New Way To Hide Debt (Call It Equity)<\/a>\u00a0<\/span><\/h3>\n
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The legacy of the soon-to-retire PBoC governor, Zhou Xiochuan, will be that in sharp contrast to his western brethren, he warned that China\u2019s credit bubble would burst before the fact. Two weeks ago, Zhou warned during the Party Congress that China\u2019s financial system could be heading for a \u201cMinsky moment\u201d due to high levels of corporate debt and rapidly rising household debt (see here<\/a>).<\/p>\n

\u201cIf we are too optimistic when things go smoothly, tensions build up, which could lead to a sharp correction, what we call a \u2018Minsky moment\u2019. That\u2019s what we should particularly defend against.\u201d<\/em><\/strong><\/p><\/blockquote>\n

Perhaps sensing that nobody in the Middle Kingdom was paying attention, we noted<\/a> two days ago his lengthy essay published on the PBoC website. It contained another warning that latent risks are accumulating in the Chinese system, including some that are \u201chidden, complex, contagious and hazardous.\u201d He also highlighted \u201cdebt finance disguised as equity\u201d as a concern. Talking of which, there\u2019s a new growth market in the gargantuan Chinese corporate debt market \u2013 we are referring to perpetual notes<\/strong>. Are you ready for the clever part about perpetual notes – they are debt but it\u2019s permissible under Chinese accounting regulations to classify them as \u201cequity\u201d – et voila, corporate gearing has fallen<\/strong>. According to Bloomberg<\/a>.<\/p>\n

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Under pressure to trim borrowings, China\u2019s companies have found a way to reduce their lofty debt burdens — even if some of the risk remains. Sales of perpetual notes – long-dated securities that can be listed as equity rather than debt on balance sheets given that in theory they could never mature — have soared to a record this year as Beijing zeros in on leverage and the threat it poses to the financial system.<\/div>\n<\/blockquote>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Perpetual Notes – China’s New Way To Hide Debt (Call It Equity)\u00a0 The legacy of the soon-to-retire PBoC governor, Zhou Xiochuan, will be that in sharp contrast to his western brethren, he warned that China\u2019s credit bubble would burst before the fact. Two weeks ago, Zhou warned during the Party Congress that China\u2019s financial system […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[130,195,2914,2615,16956],"class_list":["post-27821","post","type-post","status-publish","format-standard","hentry","category-economics","tag-china","tag-debt","tag-pboc","tag-peoples-bank-of-china","tag-zhou-xiochuan"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27821","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=27821"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27821\/revisions"}],"predecessor-version":[{"id":27822,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/27821\/revisions\/27822"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=27821"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=27821"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=27821"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}