Chinese Debt Imploding: Hospitals Need Loans From Nurses

-edited

Speculative loans in China are souring rapidly. Ruzhou, a city of one million people provides examples.

Struggling to keep its economy growing, the city of Ruzhou spent big, but is now asking its health care workers for cash to stay afloat.

Begging Nurses for Money

The New York Times asks How Bad Is China’s Debt?

Ruzhou, a city of one million people in central China, urgently needed a new hospital, their bosses said. To pay for it, the administrators were asking health care workers for loans. If employees didn’t have the money, they were pointed to banks where they could borrow it and then turn it over to the hospital.

Ruzhou is a city with a borrowing problem — and an emblem of the trillions of dollars in debt threatening the Chinese economy.

Local governments borrowed for years to create jobs and keep factories humming. Now China’s economy is slowing to its weakest pace in nearly three decades, but Beijing has kept the lending spigots tight to quell its debt problems. Increasingly these deals are going sour, as they did in Ruzhou, and the loans are going unpaid. Lenders have accused three of Ruzhou’s hospitals and three investment funds tied to the city of not paying back their debts.

Local officials have long used big spending to keep the economy growing. Ruzhou is home to a number of white-elephant projects, including a stadium and sports complex turned e-commerce center, now largely unused. A shantytown redevelopment project, begun four years ago to give rural residents new homes, has been slowed for lack of money, locals said.

Doctors and nurses at the traditional Chinese medicine hospital complained to one local state-owned newspaper that they were being ordered to give between $14,000 and $28,000. At Ruzhou Maternal and Child Health Hospital, nurses and doctors were told they had to invest between $8,500 and $14,000, according to government online forums and state media.

Ruzhou officials did not respond to repeated requests for comment. Two employees of The New York Times who traveled to the city were briefly held by the police and forced to leave.

Tip of the Iceberg

Ruzhou has several hospitals in trouble, an unused sports stadium, a cultural complex in shambles, and a failed shantytown project.

Play this same scene throughout China.

It's everywhere.

Nobody is quite sure how big the problem might be. Beijing says the total is about $2.5 trillion. Vincent Zhu, an analyst at Rhodium Group, a research firm, puts the figure at more than $8 trillion.

Factor in the world's worst air pollution and water supplies you would have to be crazy to drink from.

Yet, US hyperinflationists think the dollar will collapse to nothing, Chinese debt somehow doesn't matter, China will soon rule the world, and the yuan will displace the dollar as the world's reserve currency.

I suggest Forget the Yuan: King Dollar is Here to Stay for quite some time.

The yuan is not even close to competing with the dollar for at least six reasons.

Meanwhile, Chinese growth is hugely overstated and its massive debt problem little understood.

Mike "Mish" Shedlock

Comments (65)
No. 1-17
Country Bob
Country Bob

But.... But... But...

FREE UNLIMITED HEALTH CARE?!?!?!

China is the most successful socialist state evah! What do you mean "pay debts"? That's just crazy talk.

Socialism means unlimited free sh!t for everyone! Unicorns peeing champagne and farting gold bricks! Now you say they have to balance the books like everyone else?

/sarc (the socialists need this sarcasm stuff spelled out)

Six000mileyear
Six000mileyear

I hope hospital personnel decided to quit and look elsewhere to work.

Country Bob
Country Bob

Instead of that racist Obama shoving his insurance scam down everyone's throat, here is what should have happened in the first place:

Mish
Mish

Editor

Yes "Free Care" !!!

themonosynaptic
themonosynaptic

Mish: I assume you have heard of Michael Pettis and maybe read his book "The Great Rebalancing: Trade, Conflict, and the Perilous Road Ahead for the World Economy". He covers this situation in detail.

Greggg
Greggg

They may have to resort to even more organ transplant tourist business to keep the scheme going.

Mish
Mish

Editor

Pettis and I have met. I invited him to speak at a fundraiser Hussman and I put on, and he few in from China to present. We occasionally share emails. We follow each other on Twitter.

thimk
thimk

it is not exactly free stuff for all in china. vast amount of Chinese have little benefits; a bifurcated system. needless to say i do get the message the article is inferring: debt should be allocated/deployed efficiently.

SMF
SMF

I've never figured out the logic how you can fix a debt problem with more debt.

hmk
hmk

When in history has a centrally planned command and control economy ever been successful? Has govt ever allocated capital better than the free market? Add the enormous costs of maintaining a police state to control its citizens, it doesn't bode well for the "Chinese economic miracle". Instead of a trade war to contain their malevolent predation on the rest of the world we should try starving them foreign currency instead of giving them the cash to dominate the west and terrorize their citizens.

Carl_R
Carl_R

The brings to mind a story from my family history. Back in the 1880s my great-grandfather ran a grocery store. He was asked to be a co-signer on a loan to fund a new hospital, which he did. When the depression of 1892 came, he had to liquidate his store and give everything to the hospital to help service the debt, and then spent the rest of the depression painting the black on pots in Denver to keep his family fed. (Oh, and yes, there were plenty of very deep depressions back in the days before the Fed).

Realist
Realist

Yep. China’s government borrows from the future to fund present growth and/or consumption. Just like the US, Japan, Europe etc

The net result will be slower growth in the future in virtually all countries that follow the same playbook.

As I keep saying: every country is simply trying to “keep all the balls in the air”, and will do anything to keep the show going. Many countries have been doing this for over three decades now. Occasionally, someone drops a ball and there are consequences.

The problem is some people seem to think they know when the next ball is going to drop. Good luck with that.

Casual_Observer
Casual_Observer

I posted recently on how the China GDP is a lie. This is just more evidence of that. China is only where they are because of the US consumer and deal with the devil that the US government/politicians and corporations made to move manufacturing to China. China's books are opaque and clear as mud. This is a net positive for other manufacturing economies in Asia as well the developed first world. There was also a flood of wealth that left China after they limited the amount of money in Chinese banks. Most of the real estate buyers on the west coast of North America are wealthy Chinese immigrants and investors.

Sechel
Sechel

China desperately needs a work out process for bad dept. It looks like this is being realized and the Chinese are embracing U.S. style bankruptcy. I posted an article from the WSJ about this. This means short term pain but a healthier China medium to long term.

Mish
Mish

Editor

"In the pre-Fed world, recessions were more common, and depressions were much"

Recession is a made-up name. Prior to the Great Depression, there was no such word!

There were no recessions, the word did not exist. Since then there have been no "depressions". There have only been "recessions".

Guess what? Recession = Depression

jivefive99
jivefive99

All the Orange Dimwit had to do was to tariff/starve the Chinese government into submission. We've known for years the Chinese govt. were trying to get capitalism's benefits while keeping freedom to a minimum -- it wasnt gonna work. All Trump had to do was begin the trade war and we'd win. But no, he had to go off on these tangents declaring war on immigrants, other smelly foreign people, and just irritate the heck out of everyone while doing nothing. What I can't understand is why no democratic presidential candidate is running as a "I would continue Trump trade but I detest everything else he says or does." That person would have gotten my 2016 Trump vote.