Lack of External Debt Makes Devaluation More Likely

Bloomberg: China's Debt Seen Rising Through 2019, Peaking at 283% of GDP
Seven out of 12 economists see the debt-to-gross-domestic-product ratio increasing through at least 2019, with four expecting a peak in 2020 or later, according to a Bloomberg News survey. Debt will peak at 283 percent of GDP, according to the median estimate of eight economists.
China reported nominal GDP of 67 trillion yuan in 2015. At 5% annualized growth, 2019 GDP would exceed 80 trillion yuan. At 283% of GDP, debt would exceed 226 trillion yuan.

Econbrowser: Chinese Foreign Currency External Debt
[W]hen offshore borrowings are included, China’s total external debt totals an estimated $2.1tn as of end-2Q15 (latest figures), or 20% of GDP, with 60% of total external debt ($1.28tn), or 12% of GDP, listed in foreign currency. When including onshore FX loans, the total amount of FX debt borrowed by China’s corporate sector as of mid-2015 jumps to $1.8tn. Although this figure is sizeable, net FX debt (after deducting the corporate sector’s FX assets) is only $793bn…
China's domestic balance sheet gains much more than it loses by weakening the yuan.

China is not unique, except in the way it resembles earlier emerging market credit bubbles. Nominal GDP growth is the goal for all domestically indebted nations. Their central banks want to increase inflation, to devalue the currency, such that debt becomes serviceable. China would love to push the CPI and PPI higher, as would the EU, Japan and United States...

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