The bear rules in the Year of the Monkey
The argument used by China bulls is that the government still has an incredible amount of control over all the risk factors that any crisis can be ‘managed through’, and while this can result in a delay in the inevitable, the inevitable will come one day. The reality of China’s position now is that it is at a point where debt has grown to a monstrous level while the banks are clearly underreporting the amount of non-performing loans they have on their balance sheets. The local government merry-go-round of funding more debt with land sales, that only have worth when there are more new buildings to build, must end sometime. While there has been some progress towards shifting the economy away from fixed asset investment to services, current growth targets are wholly incompatible with an economy that isn’t growing debt as fast as it is now, which is exactly what it must stop. Read Vimal Gor's full analyis: (VIEW LINK)
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