| inbluevt | Date: Monday, 2013/08/26, 11:36 AM | Message # 1 | DMCA |
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August 26, 2013 5:01 pmThe debt dragon: Credit habit proves hard for China to kickBy Simon Rabinovitch in GuiyangThe Chinese government says its debt problem is under control, but the people of Pianpo village have cause to disagree. Over the past year they have seen their water cut off, rubbish piling up in the streets and their wages going unpaid as debt has mounted. An elevated motorway soars over the villagers’ concrete homes, meant to connect them to central Guiyang, one of China’s fastest-growingcities. Instead, the slip road to Pianpo ends in a patch of gravel. The state-owned company building the road took on too much debt and could not pay its construction workers. Water pipes were dismantled when the roadworks began but were never repaired when cash ran short. A couple of times a day, Chen Xiuxiang, 75, trudges up a hill to fetch his weight in water – 120 pounds – from a working tap, carrying two buckets on a wooden pole across his shoulders. Most Pianpo residents do the same. “They keep promising they’ll fix things but they never do,” says Mr Chen. For most of its past 30 years of growth averaging 10.5 per cent, China did not rely on credit. But it has become ever more reliant on debt since the global financial crisis, drawing on banks, bonds and an arrayof lightly regulated institutions to keep its economy roaring.This debt dependency has put China at a dangerous crossroads. If the government is serious about containing financial risks, growth may slow sharply as it weans the country off debt, burdening the global economy.Yet that prospect is less frightening than the alternative. If the government loses its nerve, the debt bubble will continue to expand, raising the spectre of economic turmoil.
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Message edited by inbluevt - Monday, 2013/08/26, 11:40 AM |
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