Odd Lots This Is Why The China Bubble Never Seems To Pop
Jun 29, 2020
Tom Orlik, Chief Economist at Bloomberg and author of "China: The Bubble That Never Pops," explores why the Chinese economy, often labeled a bubble, continues to thrive despite alarming debt levels and state-directed investment. He discusses the unique resilience observed post-COVID and the challenges posed by weak consumer demand. The conversation delves into China's monetary policies, the government's role in revitalizing ghost cities, and the complexities of navigating both trade tensions and domestic innovation, raising questions about sustainability and the future of Chinese economic growth.
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China's Debt Situation
- China's debt-to-GDP ratio increased significantly from 2008 to 2017, raising concerns about sustainability.
- Much of this debt is held by state-owned enterprises, local governments, and state-owned banks.
China's State-Controlled System
- China's state involvement in the economy allows for internal resolution of bad loans, preventing widespread crises.
- This differs from Western economies where private sector debt and negotiations play larger roles.
Guiyang's Ghost Town Solution
- Guiyang, China, addressed its ghost town problem by demolishing existing homes and giving residents money to move into new apartments.
- This unusual solution highlights China's unique policy tools and their potential social downsides.
