Hi Ramsey, Message 19639361 <<"bad debt" in China>> ... pragmatically speaking, without political bias colouration, the stuff should be considered past social transfer and infrastructure investment payment, and when the bank and its borrowers are owned by the same owner, the bank becomes a mere money-moving function, whereas when the depositors and the bank work for the same outfit, the depositors are simply employees.
The 'bad debt' money is gone, long replaced by inflation, and now only mostly the ledger items remain to be cleared away. A trillion dollars of bad debt?! Maybe, perhaps, depending on who is counting, but in the above described scheme, why does it matter. One might as well make the 'bad debt' 50 trillion via the use of chained dollars, hedonic massage, and tallying the state-owned enterprise accumulated losses to date.
Oops, cannot make it 50 trillion, because there hasn't been that much 'wealth' visible.
New bad debt is no doubt being created, but then this is also part of the process of growth.
The successful IPO floating of PICC Property/Casualty and China Life, both were simply the ex-state monopoly insurance underwriters (previously the same company known as People's Insurance Company of China, or PICC) that were close to technical insolvency, involved the clearing of shortfalls by the state (with a guarantee) and the recruiting of eager investors.
I myself was involved in the China insurance industry for 5 years (1998-2002) by way of a long-term project, and I am aware that many (or rather, many many) of the industry's staff from all the domestic and international invested companies were trained in a very organized way, from product formulation, sale/marketing, accounting, risk assessment, underwriting, claims processing, to investment. Much was learnt also from the likes of AIG and other international partners in local deals. The training covered 100s of thousands over varying periods, and encompassed both industry staff and regulatory staff. The whole affair was methodical, and no less so then the 'experiments' that gave rise to the industrial zones and education zones.
I am aware of similar efforts in the banking sector.
I am not saying there will not be recessions, inflations, deflations, unemployment, or workers unionizing etc, but I am saying the status, as in a snap shot at a fixed point in time, is not as relevant to China watching as the process, as in the trend.
Just as another example, in counter-point to what the media is fixated on, namely the 'bad debt problem in China' say. There are many who keeps pointing out that China's growth numbers are fake, cooked up, manipulated, or otherwise unreal. To that one can only point out that the airports, planes, highways, cars, power stations, material shortages, power outages, and GM Buicks sold must also be false, and P&G, IBM, and 3M China must also be reporting fake numbers.
The central fact remains, at the simplest level, that the money cycling between Japan, USA, and China is causing a shift in the relative sizes of the three economies, as in what Japan lends to the US ends up in China via consumption spending, then in Japan as capital equipment purchase, then back in China as FDI. Otherwise, in this drastically simplified model, how can the relative size of economy change when all three countries are running the money presses until they are piping hot?
One thing I keep hearing from domestic Chinese who had left the country from as recently as 3 years ago and paid a return visit, 'whoa, everything is changing so fast', and their comment is not simply applied to the visible, but also to systems, processes, and ways of thinking.
But, outside China, I often hear the old biases talking, year after year, with China forever at the precipice (as in the opposite of recovery just around the corner), but otherwise making no intuitive sense.
When even the TianAnMen Incident failed to bump China off-course, a simple cyclical recession will?!
The road towards TeoTwawKi is long and much amusement is still in wait :0)
Chugs, Jay |
