The Gold Standard | Chinese buyers defer and default

Reuters does a pretty good job of putting together this story on how a Chinese city saved a small state-owned firm from going bankrupt by bailing out the holders of its commercial paper in full. Bank loans remain uncertain!

FT reported on its website on 20th May that some Chinese buyers of thermal coal and iron ore are deferring purchases and defaulting on contracts. That squares well with this short blog post.

A friend shared this story from China local press with me. The statistics on the PBoC enterprises’ confidence index is significant:

Along with decreases in lending, enterprises in China are clearly losing confidence inthe country’s economy. According to a survey of 5,000 companies by the PBC, anindex tracking enterprises’ confidence in the country’s economy sank to 39.2 percent inthe first quarter of this year, the third consecutive quarter of decrease, far below the 50percent mark which separates optimism from pessimism. As China’s business climate gets frostier and its entrepreneurs become less ambitious, it’s inevitable that importswill suffer in the process.

To the best of my knowledge, this PBoC survey of 5000 companies is not actively tracked in Bloomberg.

Yet, talk of economic stimulus in China excites investors. Scepticism, people, scepticism! Where is it? Why have investors lost it? Why have they stopped demanding risk premium? Why are they giving away their hard earned money so easily?

I am not able to make sense of this story – as to its deeper significance.

Amidst all the hand-wringing and hand-waving on Greece, Spain, Europe, the Indian rupee and what else, this piece of news on the Pentagon annual report on Chinese military went unnoticed:

“Chinese actors are the world’s most active and persistent perpetrators of economic espionage,” the report said.

That is par for the course for an aspiring superpower. That is how they compete.

The overexpansion and invasion of politics in the higher education system has made China’s universities yet another victim of political corruption. [Link to full article]

There are something that are still common between the rising Asian giants!


DISCLAIMER: This is an archived post from the Indian National Interest blogroll. Views expressed are those of the blogger's and do not represent The Takshashila Institution’s view.