Bills Now Due on Vacant Useless Chinese Properties

Mish

After years of malinvestment, the bills are now coming due in China.

With more than $6 trillion worth of debt, Chinese SOEs and cities find it increasingly difficult to meet payment deadlines.

Malinvestments aside, the Bills Come Due for China’s Local Governments.

For decades, local governments in China borrowed heavily to build urban infrastructure, helping to fuel the country’s red-hot economic growth. Now, they are under pressure to pay the bill, adding another financial worry to Chinese policy makers’ list.

Independent economists estimate that China’s municipalities have racked up more than $6 trillion in debt—including debts authorities don’t acknowledge on their books. Tax revenue and returns on the roads and other infrastructure built with borrowed money aren’t enough to pay down the debts. Land sales, which local governments have relied on, have weakened as the economy slows.

With nearly 3 trillion yuan ($428 billion) in bonds coming due in the next two years, on top of bank loans and hidden debt, local governments need to find ways to refinance.

Meanwhile, it has become nearly impossible for local governments to tap riskier lending channels. Beijing’s efforts to rein in overall debt has meant new restrictions on informal lending. “Previously, local governments could just keep on rolling over debt, but now they can’t do that,” said Allen Feng, a China analyst for consulting firm Rhodium Group in Singapore.

China, like Japan in the 1990s, Will Be Dominated by Huge Zombie Banks

None of the above is in the least surprising.

As noted on November 18, China, like Japan in the 1990s, Will Be Dominated by Huge Zombie Banks

On November 22, I commented Key Thought of the Day: China Today is Like Japan in 1989.

But it's not just China.

$250 Trillion in Global Debt

Questions abound.

For example, I wonder about the $250 Trillion in Global Debt: How Can That Be Paid Back?

If you don't believe it can be paid back, then I am with you.

My answer is to buy gold. What's yours?

For discussion, please consider How Does Gold React to Interest Rate Policy?

Mike "Mish" Shedlock

Comments (37)
davebarnes
davebarnes

Why is the answer: buy gold? Shouldn't it be: buy ammo and MREs?

No. 1-13
mharris240
mharris240

Where are you storing your gold Mish? Remember the 1930s? Or maybe if the government doesn't outright confiscate it, they nail us with a 90% windfall profits tax. If that's the case, what's the point in owning gold? Store it in Switzerland? Singapore? Perhaps.

Maybe a better idea is to simply leave this country and relocate somewhere else. Still researching this idea.

dagnyg
dagnyg

The CCP will react in an authoritarian manner to "disappear" this debt. My guess is the first iteration will be a stealth monetization, maybe via a bad bank zombie that will try to jam the debt down some memory hole. Just like the US Fed and bankster cartel will do here sometime in the 2020s.

mkestrel
mkestrel

My question is when will the US and Federal reserve malinvestment bill come due?

AWC
AWC

How will $250 trillion in debt be paid back? It will ultimately be defaulted on, by way of the collapse of an unsustainable centralized economic system. Ala, Soviet Union?

Sechel
Sechel

Chinese mal-investment? How can this be? Seems only a few days ago you praised the Chinese on their intelligence over investing in coal and not solar. Maybe the truth is Centrally planned economies may allow for faster decisions while permitting many bad ones.

Sechel
Sechel

perhaps China will avoid the U.S. solution taken after 2008 and force banks to raise equity and write down bad debt. Seems China is beginning to encourage bankruptcies too

Felix_Mish
Felix_Mish

Who is the money owed to?

Realist
Realist

Mish, if you want a clue as to what is going to happen with all this debt, look to your own statement; “China today is like Japan in 1989”.

What has happened to Japan over the last 30 years?

It’s amazing for how long the can Is being kicked down the road. Japan, China, Europe, USA. Rather than a depression, civil war, crash; simply expect slowly declining living standards going forward. That’s how it will be paid for.

Blurtman
Blurtman

Current debts are in US dollar # 1. With the creation of the new US dollar # 2, it's a whole new debt ballgame.

FromBrussels
FromBrussels

China endebted up to the eyeballs ? Most countries are these days !... Don t forget however that our utterly stupid 'leaders' allowed China to surreptitiously conquer half the world, and the latter is probably an understatement ! How many african, south american, asian and even european countries (Italy, Greece for example) owe enormous amounts of money to China ? Comparing China with Japan doesn t make sense at all, Japan never owned half the world, so don t you 'worry' about China, it will be the last house of cards to fall apart when push comes to shove ....

Irondoor
Irondoor

Anyone ever think about how the world will be in 100, 500, 1,000 years? No, the only thought is "what will happen when the markets open tomorrow"? The future doesn't matter.

My earliest ancestor that we have information on was "born in a foreign land", likely Scotland or Ireland. Came to this country and fought in the Revolutionary War to escape the King's control. His son was born in 1776. 243 years and 8 generations ago. Family members, including myself, have fought in every war since. Seems that war is our defining lifeline.

What will the next 243 years bring to yours and my descendants? If the prior 243 are any clue, then it will be more wars, more debt, more lies from the powers that be. Inflation will be the standard of the realm, as it has been since the birth of the "dollar" in 1792, especially since coming off the gold standard.

But...will there even be a dollar? Will it be replaced by a Chinese currency when/if they become the dominant economic and military power in the world? Or will the dollar be replaced by a crypto dollar? Maybe there will be a "world currency" that is also crypto. Or maybe the world will descend into a barter economy after some devastation event.

God only knows, but I do imagine one thing: The world will be a hell of a lot different 8 generations from now and our descendants are going to have to deal with our mistakes.

dowjones3900
dowjones3900

Perhaps transactions will be done with something like bit coin.


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