(Porn is on
the next blog. Here only China and other boring stuff)
Many
pictures during the last weeks showing the size of Chinese Trusts and Wealth
Management Products are very small compared to assets, GDP, deposits, etc. (See
below a neat one, from BCA).
True,
chances of banking crisis is small in China. But, as I see, bankruptcy is a
signal that projects have negative rate of return. Suppose there was
overaccumulation of capital and many prices were distorted (interest rates, exchange rate, commodities, pollution). Now, as prices get corrected, many previous investments
become unprofitable, and the economy shows a much lower productivity. As a
result, GDP drops.
I guess my
point is that, even without a banking crisis, broad based trust funds problems
indicate Chinese GDP could face a severe slow down.
Fk, se as novas reformas da China melhorarem as instituições econômicas então a produtividade cresce e logo o estoque ideal de capital por trabalhador também cresce. Me parece que pode-se desarmar a bomba através de reformas econômicas e politicas que aumentem a produtividade.
ReplyDeleteyour logic is perfect. but I think overinvestment is so big that it will take too long for a productivity catch up
ReplyDeleteGreat point FK. I think China situation is a bigger version of brazilian PND II without the problem of foreign debt.
ReplyDelete