huangthomas

China and Emerging Market Investing: Real Basis

There are three ways of doing things: right, wrong, and Chinese ways. The central government requests the provincial government to share 70% of the cost of the 4 trillion yuan stimulus. Local governments have no right to issue bonds. Where the money is going to come from? They are asked to borrow money from large banks, they are all state-owned.

Did we ever payback our national debts? Do you expect provincial governments to pay back the loans from the banks? Pay interest? So, they are NPLs. Eventually, the central government is required to bail out SOE banks. That is the whole story. It is simply a Chinese way.