Monday, March 8, 2010

China's Local Government Debts

Keeping track of the Chinese economy is a full-time occupation. In all my reading on the topic I've come across many, many red-herrings and warning signs. Business Week recently ran an article about local governments by-passing regulations to heap even more debt onto their balance sheets. This comes after an explosion of credit in that economy:

"China’s local governments are raising funds through investment vehicles to circumvent regulations that prevent them borrowing directly. The extra borrowing, not counted in official calculations, could lead to debt rising to 96 percent of gross domestic product ratio next year and in “the worst case” trigger a financial crisis".