JimBowie1958
Old Fogey
- Sep 25, 2011
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Provincial borrowers defer loan payments | Economy | chinadaily.com.cn
So the Chinese depression is finally starting to roll out, and Japan and Australia will catch it in the shins. Will add just one more pile of stress to global finance.
How much longer before the whole global economy does a nose dive?
BEIJING - China's biggest provincial borrowers are deferring payment on their loans just two months after the country's regulator said some local government companies would be allowed to do so.
Hunan Provincial Expressway Construction Group is delaying payment on 3.11 billion yuan ($490.5 million) in interest, documents governing the securities show this month. Guangdong Provincial Communications Group Co, the second-largest debtor, is following suit. So are two others among the biggest 11 debtors, for a total of 30.16 billion yuan, according to bond prospectuses from 55 local authorities that have raised money in capital markets since the beginning of November.
As local governments delay payments for projects commissioned as part of the stimulus to ward off recession in 2009, less money is available for bank lending even as China is taking steps to inject more into the economy. The central bank has held interest rates at 6.56 percent since July to boost the economy, while the US Federal Reserve and the Bank of Japan have kept benchmark rates near zero since 2008.
"When companies start to roll over debt they're not retiring debt, and banks aren't retrieving their capital, so you're crowding out new lending," Patrick Chovanec, a professor at Tsinghua University in Beijing, said in a Dec 13 interview. "This is a problem that's going to start to bite next year."
So the Chinese depression is finally starting to roll out, and Japan and Australia will catch it in the shins. Will add just one more pile of stress to global finance.
How much longer before the whole global economy does a nose dive?