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Asia Goes on a Debt Binge as Much of World Sobers Up
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Malaysia's debt to GDP ratio increased to 242% in mid-2012 from 192% in 2008 according to McKinsey. As export growth has slowed the Malaysian government is relying on credit expansion to consumers and large capital projects such as the planned subway project in Kuala Lumpur to sustain growth. Similiar credit expansion is seen in other Asian countries- Thailand, Vietnam, Singapore, Hong Kong. The period 2008 to 2013 has seen a rapid acceleration in credit expansion in these countries and especially in China. China's debt to GDP ratio increased to 183% in mid 2012 from 153% in 2008, according to McKinsey. Nomura Holding's economist Zhiwei Zhang, and other economists say it is above 200% when government data on "shadow banking" lending institutions such as trust companies is included. IMF economist Giovanni Dell'Ariccia has studied of debt expansion and credit booms since the 1970's. He and other economists at the IMF have found that credit booms- the rapid increase in credit to GDP ratios- end up in crises one third of the time, result in below par growth in another third of the time, and only in one third of the time does growth continue at the high pace. Alex Frangos talks to government officials in Kuala Lumpur who do not take seriously the high vacancy rate for office buildings in the capital of about 20% even as new office towers are being built. Bob Davis gives the example of government owned Hunan Expressway company in China which has a huge road building program and doubled its 2009 debt levels. Another state owned company in shipping China Cosco Holdings increased total debt from 85 billion yuan in 2009 to 123 billion yuan in 2012. As export growth slowed in China in 2009 credit expansion is driving growth. The normal restraints of the market are absent in China's state owned companies. Charlene Chu, senior director of Fitch Ratings Inc in Beijing, says 2012 demonstrated that the Chinese government cannot slow credit growth without risking a decline in growth. China's GDP growth in the 1st quarter of 2013 slowed to 7.7% from 7.9% in the 4th quarter of 2012. This poses a serious problem for China. China has never experienced the kinds of problems seen in Asia after the 1997 banking crisis, in the eurozone today, and in the U.S. following the financial crisis of 2008, making government officials prone to complacency about the risks.
China's local government debt poses a risk for the economy
06/17/2010
China's local government debt is estimated to be in the range of 27% to 42% of GDP. Loans by banks to local government financing vehicles face high risk of default.
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Asia Goes on a Debt Binge as Much of World Sobers Up
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06/10/2010
Rapidly increasing credit to GDP ratios in Hong Kong, Singapore, Malaysia and Thailand since the 2008 financial crisis. Increasing bank credit to households and businesses.
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Asia Goes on a Debt Binge as Much of World Sobers Up
Wall Street Journal 05/24/2013
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Asia Goes on a Debt Binge as Much of World Sobers Up
Wall Street Journal 05/24/2013
A Warning Light to Alert the I.M.F.
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China's Debt crisis
07/29/2010
The debt of local governments estimated at between 27% of GDP by Dragonomics and the China's National Audit Office, to a much larger 42% by Prof. Shih of Northwestern University.
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Asia Goes on a Debt Binge as Much of World Sobers Up
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China's Silver Linings Playbook
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Charlene Chu Is the 'Rock Star' of Chinese Debt Analysis
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Large exposure to local government financing vehicles of China's smaller banks
06/17/2010
Larger banks have a smaller portion of their loans made to local government financing vehicles than the larger banks. Agricultural Bank of China, Construction Bank of China, Bank of China, Industrial and Commerical Bank of China have 6-7% of their loans made to local government financing vehicles, compared to 20% for Everbright Bank and 13-20% for other smaller banks. This means they will be the first to be in trouble in a financial crisis because of the high risk and poor asset quality of such loans.
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Asia Goes on a Debt Binge as Much of World Sobers Up
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Chinese Banks' Divided Capital
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China's Silver Linings Playbook
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Credit Warnings Offer World a Peek Into Chinaâs Secretive Banks
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Charlene Chu Is the 'Rock Star' of Chinese Debt Analysis
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Off-balance sheet shadow lending by Chinese banks.
01/12/2010
Even after the efforts to restrain lending in 2010 in China following heightened stimulus lending in 2009, the level of bank lending has exceeded 10.5 trillion yuan and is at the same level as 2009. This includes the lending through trusts and other mechanisms according to Fitch Ratings. This explains the inflationary pressures and property bubble.
Grouped Articles
Asia Goes on a Debt Binge as Much of World Sobers Up
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China's 'Shadow Banks' Fan Debt-Bubble Fears
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China's Silver Linings Playbook
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China Central Bank Warns Banks on Liquidity
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Credit Warnings Offer World a Peek Into Chinaâs Secretive Banks
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Loose monetary policy in China in 2010-2011
03/07/2009
Difficulties of making a soft landing after the huge lending boom in China in 2009-2010 continues into 2011. Inflation and other risks from this lending continue. The burden of large local government debt in China and non-performing loans in the banking system. China's local government debt is estimated to be between 27% of GDP to 42% of GDP. Because of the opaqueness of the financial system the exact amount is not clear and estimates vary.
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Asia Goes on a Debt Binge as Much of World Sobers Up
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Credit Warnings Offer World a Peek Into Chinaâs Secretive Banks
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The IMF and the year to year growth of a country's outstanding Credit to GDP Ratio as a Warning Light Indicator for Country Economies
04/14/2010
The outstanding credit of a country to its GDP ratio and its year to year growth is a warning light indicator is used by the IMF. If the year to year growth in this ratio is over 5 percentage points for a country in a particular year it indicates a warning light. Using this indicator Brazil, China, Turkey are in anticipatory crisis conditions. Use of this indicator would have predicted the crisis in the U.S. in 2008, and the crisis in Ireland, Portugal and Greece, ahead of time so that action could be taken.
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Asia Goes on a Debt Binge as Much of World Sobers Up
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Malaysia's economy 2010-2014
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Candidate Shakes Malaysia's Status Quo
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Rapid acceleration in credit growth in China after 2008 and the complacency about the risks to the financial system
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Asia Goes on a Debt Binge as Much of World Sobers Up
Wall Street Journal 05/24/2013
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The effects of the stimulus spending binge and speculative behaviours of local governments and state owned companies, on the loans made by state owned banks.
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Asia Goes on a Debt Binge as Much of World Sobers Up
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China's 'Shadow Banks' Fan Debt-Bubble Fears
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China's Silver Linings Playbook
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Wall Street Journal 06/25/2013
China Central Bank Warns Banks on Liquidity
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Credit Warnings Offer World a Peek Into Chinaâs Secretive Banks
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Jiang Jianqing, CEO of Industrial and Commercial Bank of China
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Jiangqing's role in the performance of Industrial and Commercial Bank of China. ICBC is considered the best run of the large state owned banks in China, with fewer non-performing loans, the use of information technology and strategies for developing a global presence.
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Charlene Chu Is the 'Rock Star' of Chinese Debt Analysis
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China Think Tank Offers Reform Wish List
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Junk bonds issued by China's housing developers in 2013-2014 and the higher risks to foreign investors
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The yields on these bonds have declined from 11-12% in 2012 to 7-8% in 2013. Investors risk losing everything as the bonds are issued by foreign subsidiaries and are not backed by the housing developer's assets in China. Creditors and banks in China are the first to get their money back in a bankruptcy as in the case of the bankruptcy of Suntech Power, while foreign bondholders risk complete losses. Developers in China are increasing issuance of junk bonds as there is limited access to other sources of financing.
Grouped Articles
Asia Goes on a Debt Binge as Much of World Sobers Up
Wall Street Journal 05/24/2013
A Warning Light to Alert the I.M.F.
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Critics Decry Risks Posed by Link Between China's Banks and Bonds
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Bond Market in China May See First Local Default
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The Man at the Center of Solar-Panel Maker Suntech's Fall
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Two party systems and the UMNO Party in Malaysia- (1) Debt, corruption and future prospects
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Linked Articles
Fund Controversy Threatens Malaysia’s Leader
Wall Street Journal 06/19/2015
Asia Goes on a Debt Binge as Much of World Sobers Up
Wall Street Journal 05/24/2013
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