Half of Chinese Debt Tied to Real Estate, Dollar Pool In Trouble

WSJ: China’s Total Debt Load Equals 282% of GDP, Raising Economic Risks
Total Debt Equals 282% of GDP: That’s how big China’s total debt load, including borrowing by the government, banks, corporations and households, had gotten by the middle of 2014, the report says. That’s far above the average for developing countries and higher than some advanced economies including Australia, the United States, Germany and Canada.

Corporate Debt Soars, Especially in Real Estate: The largest driver of this growth has been borrowing by non‑financial corporations, including property developers. At 125% of GDP, China now has one of the highest levels of corporate debt in the world.

FTAlphaville: About that $9 trillion global non-bank credit exposure…
To us, that suggests the more QE the US did without issuing a commensurate amount of its own debt because of, you know, debt ceiling, the more it encouraged the external US dollar float to be relent multiple times (fractional reserve style) abroad before finally being soaked up by the sort of SWFs that would reinvest that float in US domestic assets.

But we’re now at a point where, unless all those external debtors have an organic way to keep dollars flowing into their coffers — i.e. without dependence on financing from non-US dollar pool sources — the value of all those loans, as well as the external US dollar pool itself, could quite abruptly and violent collapse in value.

And since the Fed is the only entity in town that can recapitalise a US dollar reserve, the question is, would it ever be inclined to expand its asset purchases to the non-US dollar-denominated sector?
THe dollar denominated debts are held offshore and are owed to offshore lenders. If the dollar ppool abruptly and violent collapsed in value, the U.S. dollar would abruptly and violently soar in value. The greatest U.S. dollar bull rally the world will ever see. The Fed will not step in now, it would be political suicide.

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