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Edition 6 December 2018 - Crédit Agricole S.A.
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  • Edition 6 December 2018

    China – Beyond the financial risk

    Chinese debt has been a major topic over the past few years. And not without reason, as it entails a risk of financial instability that is real, despite the existence of buffers. But possibly overly much so, to the point of overshadowing the rest. However, beyond the financial risk, there are also other risks, questions and uncertainties, linked to the recent political and institutional developments, as well as the deterioration of relations with the United States.

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  • Contents:

    - The weight of the debt
    - Strong points that give it time
    - An attempt to control the financial risk
    - Breaking from past mechanisms
    - A higher concentration of power...
    - ... does not necessarily mean great decision-making efficiency, nor an acceleration in reforms
    - An administered economy and State capitalism
    - Opaqueness, arbitrary interventionism and political risk
    - Battle of Powers
    - In all, reasons to be very cautious

  • Extract:

    This concentration, and even personification, of power, and reinforcement of the CPC's role appear to be more in line with the current economic model, an economy that is administered to serve State capitalism, and even require or impose de facto the strengthening of this model. How could it be otherwise, when the control of economic levers, the economic cycle, information and judicial power are an intrinsic part of a single-party system, or in other words, key to the survival of the Party?
    In the end, with this new political and institutional framework, it is not at all certain, to not say unlikely, that the Chinese economic model will tend towards "western" models, which leads us to look beyond the financial risk and consider or reconsider several other risks.
  • China: domestic debt (exclu. general government) and growth

    The massive use of credit to finance Chinese economic growth, no matter how strong, has been accompanied by a substantial loss of efficiency in recent years. Loss of efficiency that resulted in the accumulation of production overcapacity in industry and other imbalances. And evidenced by the diverging trends of growth and of the total outstanding of loans to the economy, expressed as a percentage of GDP, since the end of 2000s.

    China: domestic debt (exclu. general government) and growth
  • Associative topics : Asia and Oceania | Economics

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