There is an article in the Financial Times (http://www.ft.com/intl/cms/s/0/35bb9e50-6a13-11e2-a7d2-00144feab49a.html#axzz…) about debt problems in China.
I have taken the liberty of summarizing the key points:
– Local governments borrowed to buy unneeded “infrastructure”
– They acted under orders from Beijing
– Unable to pay, they “rolled the debt over”
– Li says it’s OK, it takes time to amortize
– Yiping says it’s fine when duration is mismatched
– Peng says everyone does it
– Most banks refuse to lend any more
– Premiere Wen says “everything is under control”
– He adds “most debt is backed by good assets and cash flows”
– Officially, there is little debt
– Unofficially, there is little transparency or accountability
– Ultimately, the debt problem falls onto the central government
– Ultimately, the debt problem falls onto the central government
Keith Weiner Economics 