Читать книгу The Political Economy of the BRICS Countries - Группа авторов - Страница 35

Incremental debt largely accrued to the private corporate sector (PCS), which is mostly associated with provincial governments, which use local government financial vehicles (LGFVs) to draw credit from the banking system to promote local infrastructure and housing investment. This is evident from an IMF study:

“A significant part of corporate borrowing in reality financed off-budget fiscal spending. Off-budget local government borrowing has increased substantially since the GFC. It was undertaken by LGFVs; as local governments were not allowed to borrow explicitly. The loans typically financed infrastructure projects and repayment was covered by future disbursements from local governments (e.g., in a form of service fees). The ‘augmented’ deficit, which LGFV spending given the fiscal nature of such operations, thus jumped from the average of around 4 percent of GDP before 2008 to about 10 percent in 2015” (IMF, 2014; Maliszewski et al., 2016: 20).

Figure 4:Rising share of shadow banking in China’s credit growth.

Source: Maliszewski et al. (2016).

Another reason for the rapid rise in debt–GDP ratio is the growth in shadow banking institutions, often sponsored by regular financial institutions to circumvent strict regulation and offer higher rates of return to its savers (Figure 4).

The above-mentioned debt ratio may be an underestimate as private sector firms have substantial overseas borrowings undertaken by their foreign subsidiaries. Such borrowings do not get registered as China’s external debt as they is recorded by the residency of the issuing entity, not by their nationality. If such borrowing is used to finance capital expenditure in China, then it could cause currency and maturity mismatch, increasing the cost of such borrowing and leading to a rise of financial fragility. Further, in the event of rising international interest rates (as is the case now with the Fed raising the rates) such a hidden debt could add to the external instability (Shin and Zhao, 2013) (Figure 5).

China has also sought to rebalance the economy away from manufacturing to services, and away from investment-led economy to consumption-driven economy (Figure 6). On the face of it, looking at the official numbers, there is a change in the desired direction, in particular in the rise of financial services. But how much of it represents expansion of genuine financial services and how much of it is statistical illusion caused by over blown shadow banking seem to be open to question.

Figure 5:International debt securities outstanding for non-financial corporate by nationality and by residence.

Source: Shin and Zhao (2013).

Figure 6:Rising share of services in China’s GDP.

Source: Steve Johnson, “Old economy focus ‘understates’ Chinese growth”, FT, December 9, 2015.

That China has made excessive investment in physical infrastructure and in urban housing — relative to effective demand — is a widely accepted fact (based on innumerable news reports about ‘ghost’ towns, unused roads, and bridges). Rising credit and debt growth (as GDP%) after the financial crisis and decelerating outgrowth has resulted in rising incremental capital output ratios (ICORs), or credit intensity of output.