On Wed, Nov 10, 2010 at 5:56 PM, <dredmond at efn.org> wrote:
> On Tue, November 9, 2010 6:18 pm, Doug Henwood wrote:
>
> > How would they rate China? I keep hearing that their banks are heavily
> > exposed to a leveraged real estate boom.
>
> Officially, they give China an AA rating, better than the US. Of course,
> this exaggerates the US decline a bit, but in fairness to Daqong, the
> ratings universe they're covering is very different – mostly China's
> blue-chip firms and the largest state enterprises. Given that this is the
> most competitive, best-managed slice of the Chinese economy, an AA rating
> is reasonable (the comparable rating for the most competitive slice of the
> US economy would be AAA, of course).
>
> Yeah, the goldbugs keep muttering about a China bubble, but I don't see
> the evidence. They have no derivatives or toxic CDOs in their system,
> requirements for getting mortgages are still pretty strict, the banks are
> state-owned, and the country is urbanizing fast -- hundreds of millions of
> people want to move to the cities. The gloomsters point to unfunded local
> liabilities, but even the most pessimistic analysis says China only has
> around $3 trillion in domestic debt and $400 billion in external debt --
> peanuts compared to China's $2.7 trillion in reserves. There's plenty of
> froth and low-level corruption, sure – probably half of China still lives
> at a subsistence level, municipalities make the occasional terrible
> investment – but China's growth is as real as those bullet trains zipping
> around the place.
>
> -- DRR
>
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