Ma Guangyuan: Debt Cliff A Greater Threat Than Real Estate Bubble

Chinese economist Ma Guangyuan sees corporate debt as the greatest threat to China's economy.

iFeng: 经济最大的危险不是房地产,而是惊人的债务悬崖
In fact, Zhou Xiaochuan's speech, the most important thing is to recognize high leverage Chinese economy as a whole . Zhou's words: "In China there is a particular point may be a little consideration, that leverage Chinese economy as a whole is relatively high everyone says total borrowing with leverage. Of GDP share, particularly in the corporate sector accounted for the proportion of loans the proportion of GDP is too high, "the word actually has two meanings: First, China's overall leverage ratio is relatively high; the second is particularly high debt leverage of the corporate sector. In Zhou Xiaochuan opinion, the cause of leveraged corporate sector relatively high three points: first, because the savings rate of Chinese nationals; the second is the development of China's capital market relatively late; the third is China since the reform and opening up a rich faster countries, but the total accumulation of folk, folk wealth is relatively small, so the opportunity to use the wealth of folk, so that they become equity is also relatively small.

I believe that Zhou's speech revealed the biggest risk China's economy now, and not real estate, not excess capacity, not government debt, but the high rate of corporate bonds, and banks thus triggering the surge in non-performing loans.

...Economic impact of China's biggest risk is corporate bonds, as well as by the rapid increase bad corporate debt caused the banks' non-performing loans to soar. Over the past few years, domestic and foreign institutions and experts concerned about Chinese corporate bonds. Last year, Standard Chartered Bank said in a report on "China's debt cliff," the said, at the end of 2014 a quarter of China's overall debt increased to 142 trillion yuan, accounting for 245% GDP, the interest on the debt reached 13% GDP, well higher than the average level of 7-8% during the 2000s, and the debt burden continues to rise.

...Chinese scholar Li Yang in recent years, studies have more to talk about China's non- financial corporate leverage problems. Prior to 2008, China's non-financial corporate leverage has been stable at less than 100%, and the lever after the crisis was evident. Debt-GDP ratio rose from 195% in 2007 to 317 percent in 2014, an increase of 122 percent; in 2008 the leverage ratio from 98% to 149.1% in 2014. In Li Yang's view, "Japan's problem is government leverage, leverage the United States is the main problem residents, Chinese leverage questions focused on Chinese companies."

...as of the end of the 2015 fourth quarter, commercial banks non-performing rate of 1.67%, to enhance the 0.42 percentage points compared with the end of 2014, the rise has been 10 consecutive quarters, the de-stocking and cleaning up zombie companies in the process, this number certainly have It will rise. Therefore, I personally have always thought that Chinese economy is undoubtedly the biggest risk corporate bonds under the economic downturn, and over the years, bank credit expansion due to credit risk. As for the real estate and government bonds, are long-term risks, at least in 2016, will not become a flashpoint risk. The proportion of China's current non-financial debt to GDP from about 100 percent before the financial crisis has increased to about 250%, in the "capacity to go" in the background, hidden risk if you do not receive timely treatment, it is likely triggered systemic risk throughout the economy.

Faced with debt risk Chinese economy, March 2 Moody Chinese sovereign debt rating outlook cut to negative from stable, Moody's March 3 turn over Chinese state-owned financial institutions and rating outlook cut to negative.

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