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America has nothing on Chinese Stimulus Plans
 

Addinator's picture
ST
 
Points)
 on 3/4/13 at 9:45pm
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Just in case anyone was worrying about running out bonds to buy China looks to be gearing up for a massive push towards urbanization through a bond market reform.

I'll admit, I've long been critical of how the Chinese do things and certainly I'm dubious of the viability of this massive of an effort. There are major structural deficiencies in China and to think that local government are going to be able to foot the tab for much of this is a stretch. Last time I checked many localities in China were underwater anyway and they still have to deal with slowing growth and a lower class clamoring for wage reforms. Not that any of that is necessarily a deal breaker, but, certainly should be cause for concern.

It's interesting however because to do this they would need to relax their foreign investment rules and really open themselves up transparency wise. I can't believe that they will be clamoring to open up the books to get investment, but then again maybe they don't need to. Add in their yearning to establish their own consumer as a larger part of their economy and I personally don't see how this all gets done.

Anyway, What say you guys? Is this the key to China re-establishing it's growth?

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Cruncharoo's picture

"I personally don't see how

CO
(Gorilla, 686
 
Points)
 on 3/1/13 at 12:42pm

"I personally don't see how this all gets done."

Pretty much how I felt after reading the article. I don't know where the demand would come from for these bonds but unless they are going to be buying them up through central banks (which defeats the purpose of the whole exercise) who is going to invest in this? The yields demanded would be so high that they'd be better off just footing the bill without it.

This to all my hatin' folks seeing me getting guac right now..

Amphipathic's picture

Wonder if the principal and

 
Points)
 on 3/1/13 at 3:38pm

Wonder if the principal and coupon will be paid in RMB or USD.

rls's picture

What we've seen, and are

HF
(Orangutan, 367
 
Points)
 on 3/5/13 at 11:21am

What we've seen, and are seeing now, is that China has been attempting to replicate the success of the 4 Asian tigers/dragons since the 1960s. That is, they grow their domestic market by exporting to the U.S. and Europe. The trade imbalance explosion of the last decade demonstrated that the Western world cannot afford to buy enough consumer goods to raise 1.3 billion Chinese citizens out of poverty in addition to the other consumer product-producing nations (Philippines, Thailand, Vietnam, Taiwan, etc.). The scale needed to create a middle class in China is far greater than the total discretionary income of the developed economies. As such, China has shifted its hope for growth increasingly on building more and more fixed assets of increasingly dubious value. Now whole cities, called ghost towns, are being built with the dual purpose of artificially inflating GDP and providing an 'investment opportunity' for a middle and upper class that cannot engage in capital flight. This is not a viable, economically justifiable state of affairs. The shoe will fall squarely on the CCP's face and the repercussion will likely be severe. On that note, no- I would not buy these urbanization bonds.

Bene qui latuit, bene vixit- Ovid

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