Combined with central government debt and other liabilities such as bad bank loans, analysts estimate China’s overall explicit debt load is about 70 per cent of gross domestic product.
But some analysts believe the contingent liabilities of the government are much higher, once debts on the books of state-owned enterprises and other entities implicitly backed by the state are included.
“If you take a very broad view of the Chinese government’s contingent liabilities rather than explicit debt on the books then the number comes to well over 150 per cent of China’s GDP in 2010,” according to Victor Shih, a political economist at Northwestern University in the US. The US has a debt-to-GDP ratio of 93 per cent, while Japan’s ratio is over 225 per cent.
Here is more.
That’s a double standard. It’s just as easy to say: “If you take a very broad view of the U.S. government’s contingent liabilities (including liabilities of the entire too big to fail financial sector) rather than explicit debt on the books, U.S. is totally bankrupt.”
I just wanted to drop by and point out exactly what Tomasz Wegrzanowski just said.
Given that, the observation is almost entirely irrelevant.
As did I.
I also second that.
and what if? they have positioned themselves for either massive economic growth or economic collapse, knowing that if they don’t have massive economic growth they will have civil unrest anyway. failure is crash and burn anyway. success and that 150 percent becomes 70 percent or much less.
It seems like you’re comparing Chinese gross debt to U.S. net debt. (Given that U.S. net debt and gross debt not very different.) Interesting all the same, but not quite as shocking.
Not to mention Fannie and Freddie with trillions of debt and also unfunded pension and health liabilities of US governments (all levels). And, of course, the Fed liabilities…
I take a back seat to no one in railing against FNM/FRE, but saying we should include their “trillions of debt” without also noting that there are “trillions in assets” backing those debts is ludicrous. Now you can argue that the nominal debt exceeds the value of the assets by some degree, but it is certainly not by trillions.
How much of chinese assets are debts owed by the USA? Should they write those off?
About pension liabilities: If you could single-handedly screw over bond-holders ala GM bailout where goods have actually changed hands, why could we not simply change the rules for future pensions and wipe out large percentages of pension liabilities?
You don’t have to eliminate pensions, but maybe cap them, tax them, limit the growth. Would people quit their jobs en-masse if such a thing happened?
This is just a hypothetical, I know that the same pension beneficiaries will never vote for someone who would take touch their pensions, but I am just wondering, would it be a terrible solution?
It’s not so much the direct reactions (people quitting their jobs en masse) that would be bad; it’s simply politically impossible. You don’t get re-elected by slashing people’s pensions.
Their GDP is probably overstated as well. Vast amounts of resources are diverted inefficiently due to their current crony-capitalist model.
So, we’re bankrupt and they are bankrupt. Don’t forget the EU.
Is there any country that hasn’t acted recklessly? Probably not. Human nature is pretty darn constant everywhere you find humans. I suppose the best strategy is to fold first and leave everyone else holding the bag. Sure, it hurts, but probably less than being the sucker who thinks he will be repaid.
Doesn’t it depend on what collateral is behind the loans?
Imagine that all the banks in the world go bankrupt except yours, and all their customers. Each bank passes on its assets including foreclosed properties to some creditor it owes money to, usually some other bank, and that bank goes bankrupt and passes its remaining assets along to another bank, and so on until it all funnels into yours.
Wouldn’t you pretty much own the world? Of course, you’d have to write off a lot of paper-money debt that your bankrupt debtors could not pay you back, and they each wrote off a lot of computer-bit debt that their bankrupt debtors couldn’t pay back, and so on. Tremendous quantities of money, just disappeared, vanished, not in your hands. But despite all the loans you lost money on, to own the world….
Except that the various bankrupt governments could take it away from you again by fiat. You couldn’t stop them unless you could hire a big loyal army.
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