It's two steps forward and one step back in China. As the country allows more market liberalization, companies find ways to exploit the system. Inevitably they run afoul of Chinese state interests, and the government adds new restrictions to remedy the situation. Thus is the ebbing and flowing of market reform in China. But how long can that dynamic persist? Today the New York Times reports that China is cracking down on overseas real estate purchases by its corporations. The businesses are using more debt than the state would like, and to limit "systemic risk" it is cracking … [Read more...]

According to Gabriel Wildau writing for the FT, one Chinese debt analyst believes China's debt could be much higher than the government is reporting. Charlene Chu tells Wildau that the amount of bad debt in China could be $6.8 trillion more than the official figures. Wildau writes: “Everyone knows there’s a credit problem in China, but I find that people often forget about the scale. It’s important in global terms,” Ms Chu said in an interview by phone from New York. Ms Chu left Fitch in 2014 to help launch the Asia operation for Autonomous Research, which specialises in analysis of … [Read more...]

Central banks around the world have employed untested emergency bond buying operations in an attempt to stabilize their markets or to encourage growth. Now those chickens are coming home to roost. The FT reports that leading central banks own a full fifth of their governments' debt. The six most active central banks, the Fed, the BOJ, the ECB, the BOE and the Swiss and Swedish central banks collectively own over $15 trillion in assets. Kate Allen and Keith Fray report: Of this, more than $9tn is government bonds — one dollar in every five of the $46tn total outstanding debt owed by their … [Read more...]

Yet another bubble has caught up to China's over-regulated economy, this time it's growing in the domestic asset-management industry. The problem for China's closed economy is that with no way for money to escape, any time the authorities manage to pop a bubble in one area of the economy, another grows somewhere else. Anjani Trivedi writes: Chinese regulators are targeting the latest bubble in their financial system: the domestic asset-management industry. Unfortunately, it is a moving target. The gargantuan industry—a byproduct of China’s trapped and churning capital—has more than doubled … [Read more...]