huangthomas

The Economist In One Bite

During the waning day of Chairman Mao's rule, more than 50% of annual national budget went for subsidies for government-owned-enter... which produce nothing or something no one want to buy. Therefore, they are mostly public debt. Thereafter, Chinese design an ingenious way to hide the public debt and to make them look financially prudent. They buried the public debt as non-performing loan in government owned banks, which serve the role of treasury. Private banks are few and small. Major lending of Banks are approved by the government. NPL of banks, thus the public debt, become a huge unknown. Over years, the government transfer close to trillions of $ from foreign currency reserves of People's Bank of China to prepare several banks for oversea IPO: Construction Bank of China, Bank of China, Commercial and Industrial Bank of China (CIBC), Bank of Communication............ They were the acts of paying back public debts. Considering the magnitude of the NPL, I have never heard of bank officials ever being sacked or punished for major NPL. The message is clear.