China is projecting an increase of 5.9% GDP in 2020
If NA could increase GDP by 5.9% we would be doing cart wheels of joy. Instead we concentrate on employment numbers.
However, china sees a looming problem. Many Chinese creditors may have problems servicing their debt payments.
So: What does China do??. The 1st line of defense is to send out bankers, to try and find a solution. 2nd line of defense is to let Co's go broke. In NA that is no big deal, but china is afraid of social unrest if unemployment increases. They already have a huge food inflation problem, thus they are concerned how much the people will tolerate.
If china allows default and BK some wonder if this will be a case of falling dominos. Most think the PBOC will step in before disaster strikes. But in china bank runs are more common than in NA. If the PBOC has to do a QE, nobody knows what will happen
If the dominos fall hard and fast enough the world could suddenly be in a big heap of financial trouble. Maybe china has to sell foreign investments to finance local problems. What ever, if the world does fall into a very deep recession/depression, we won't know until it is too late
Trouble always seems to come from where you least expect it
Thanks much Wayne!
Rapid expansion of private company debt linked to shadow banking fuels distress
https://www.ft.com/content/068a83e0-27a7-11ea-9305-4234e74b0ef3
"Corporate defaults in China surged to a record high in 2019, raising new questions over how policymakers in Beijing will manage mounting financial distress among large private and state-owned companies. Onshore corporate defaults hit Rmb130bn ($18.6bn) in the final weeks of the year, breaking the record of Rmb122bn last year, according to data compiled by Bloomberg, as economic growth fell to a three-decade low. Private companies that expanded rapidly in recent years, accruing large piles of debt, have been at the heart of the explosion in corporate distress. Some of the country’s leaders in sectors such as chemicals and textiles have faced financial pressures in recent weeks. Defaults on US dollar-denominated bonds, which until recently were closely guarded with implicit state guarantees, have hit $2.9bn this year, according to data from S&P Global Ratings. “The recent pick-up in defaults adds to broader evidence that corporate balance sheets remain under strain,” Julian Evans-Pritchard, senior China economist at Capital Economics, said in a recent note to investors."