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1.Market Observations, 8.Was Sticky

5 Dec 2016 (AFR) – China’s liquidity flood stirs debt fears

(5 December 2016, AFR, p19, by James Kynge, Financial Times)

‘When Marco Polo went to China he discovered something better than alchemy. Rather than turning base metals into gold, he marvelled that the Chinese were creating money out of paper. But what the 13th century Venetian traveller could not know was how perilous a paper currency would prove to be for the country that invented it.’ <snipped…>

‘China’s problem this time is not inflation, at least not yet. It is rather that . . . ‘ <snipped…>

‘The dimensions of China’s liquidity splurge are startling. . . . ‘ <snipped…>

‘But for China’s modern rulers, the effusion of liquidity presents as many problems as it promises to resolve. The main issue is that debts are piling up almost as fast as China generates money to service them, creating what Jonathan Anderson of the Emerging Advisors Group calls a “debt funding bubble”. ‘ <snipped. . . >

‘With outbound investments from Chinese corporations running at $US150 billion in the first 10 months of this year, up from $US121 billion last year, such outflows are increasingly being seen as part of . . .’

Read more at AFR.com (might need AFR login access, or tr: AFR.com/trial)

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