I samband med den amerikanska ”subprime”-krisen och dess globala eskalering för numera 3-4 år sedan kunde Kina nästintill uppträda som räddare av världsekonomin.
Kinesiska stimulanspaket i storleksordningen 600 miljarder USD och en extrem kreditexpansion medförde att Kina lyckades uppträda som viktig tillväxtoas även under det svåra konjunkturåret 2009 – med positiva återverkningar på många företag i övriga Asien, USA och Europa. Det ter sig emellertid osannolikt att Kina återigen skulle kunna uppträda som tillväxtmotor vid en eventuell förnyad global konjunkturförsvagning som följd av kaoset på världens finansmarknader.
1. The state of China’s public finance is – officially – still favorable. Recently, however, doubts have risen about the real public debt situation, particularly when it comes to provincial and local indebtedness. Furthermore, a lot of public financing is done outside the official budget process and, consequently, not part of reported government debt.
2. The fast credit expansion in past years has risen the risk of future bad loans considerably. Estimates say that total loans have increased from 120 percent of GDP to as much as 175 percent in the past three years. If these numbers are roughly correct, there is really an urgent need to achieve a markedly slower credit growth for the time being in order to avoid future huge credit losses.
3. An urgent need to achieve a substantially slower growth of Chinese bank loans comes also from China’s accelerating inflation problems. CPI rose by 6.5 percent in July – and by more than 7 percent in the rural areas where people’s income is clearly lower than in the urban regions. Even worse, food prices went up by almost 15 percent. Unfortunately, poor people are most sharply hit by this development. Inflation is the worst enemy for income distribution in China – a phenomenon that certainly is very much disliked by China’s political leadership as well. In other words: there is no way for China to conduct a visibly more expansionary credit policy any time soon unless GDP growth is really coming in bad regions. This can be said even if the peak of CPI increases may be reached in the forthcoming months.
4. The bubble in the real estate sector of the metropolitan areas still does not seem to be disarmed. New stimuli for construction activities are really not needed.
5. Finally, China needs some cooling down of its investments in order to optimize investment efforts again. In the past three years, a significant number of investment projects were not really the most urgent ones. Capital allocation has to be improved which assumes less generous quantities for new credits.
Summarizing the aspects of this information should not mean that China will be facing a poor development later this year and/or in 2012. My own survey from June with China specialists from all over the world predicts a GDP growth on average by 9.0 percent this year (q4 this year: 8.4 percent) and by 8.6 in 201. This seems to be realistic – and not bad after all.