The article kind of assumes that you understand what these "local government financing vehicles" are. Which is probably true for the median reader of the story, but it wasn't true for me, so I went looking around for an explainer and found this from 2013: https://www.ibtimes.com/chinas-local-government-financing-ve...
In contrast to state governments in the U.S., most local governments in China are forbidden to borrow money directly.
Historically, land sales have been a large revenue source for local governments, but since the global financial crisis this revenue source has diminished. Yet local government spending, especially on infrastructure investments, has accelerated...
Detroit filed for bankruptcy with debts of $18 billion on July 18, but this is the average amount of debt for many Chinese cities. A 2012 audit of 36 local governments found $624.6 billion in debt -- suggesting there are at least a few Chinese cities with debt equal to, or in excess of, the $18 billion that sunk Detroit.
So the news is that what was understood to be ~$625 billion in debt six years ago has turned into $5.8 trillion in debt today. Which is, like, 322 Detroits.
The article mentions LGFVs, without defining the acronym or explaining much about them.
Here's another article that goes into more detail:
Local government funding vehicles (LGFVs) are companies owned and funded by a local government in order to raise funds for municipal projects. These firms stem from the taxation system in China that allocates the lion’s share of revenue to the national government, and from regulations implemented in 1994 that prevent the government from selling bonds. This strict budgetary regulation was intended to promote sound financial management and prevent local governments from spending themselves into deficits. LGFVs became prominent after the Asian Financial Crisis of 1998 and the Great Financial Crisis of 2008 when central government stimulus packages put the onus on local governments to raise necessary funds. LGFVs are effectively state-owned enterprises (SOEs).
I'm not sure why they thought everyone should know what that meant. As I looked it up, I came across articles from as far back as 2013 saying that China's collapse is imminent. Considering that still hasn't been the case, this may not be as imminent as Bloomberg is making it seem.
LGFV (Local Government Financial Vehicle) are companies set up, fully owned,
and operated by local governments that borrow money from the banking and financial
system to engage in businesses that are fiscal in nature, like infrastructure
investment and public affairs. Local governments can't sell bonds and Central government takes most of the taxes so LGFV is the only way they can finance their projects.
Most of that $5.8 Trillion valuation is not going to vanish because they are real investments into infrastructure. Most problems come from wrong cash flow estimates, and lower than estimated returns and some nonprofitable investments. The actual potential loss or haircuts investors are facing is some percentage of that sum. Probably few $100's of billions, maybe even close to $1T.
The reason why there are defaults is because Chinese government wants to fight moral hazard problem that comes from bailing them out. The government will allow certain number of LGFVs to default to set an example (like Lehman Brothers) but if the credit squeeze starts to hurt "Chinese main street" they will step in.
How much accounting regulation is actually enforced on these? How many ghost projects or empty infrastructure with revenue booked using estimated values instead of real sales?
I don’t doubt that it won’t be an entire haircut, but to say these function like regular bonds seems odd.
Is there a contagion concern here? What other products are collateralized using these? We saw this of course with well-rated packages of loans actually being manure. Anything like packaged LGFVs with hedges?
Asking because I have no idea and am legitimately curious about the possible downsides.
Serious question, as I don't really understand LGFVs: if most tax revenue goes to the central government, how does the local government intend to pay back the financed money? Are all LGFVs tied to projects that are intended to create revenue?
I could see that working for land development, maybe some infrastructure... but if they are selling bonds to cover day-to-day public affairs, that doesn't seem sustainable. If those expenses aren't covered by current tax revenue, where are they going to get the future revenue to pay the investors, plus interest, plus ongoing day-to-day expenses at that point?
Does anyone know what expectations or models they are using in issuing these, or what the buyers' assumptions are? That would seem to be important. If someone is buying a 30-year note expecting the tax base growth to be 8% p.a. over that 30 years, with that compound growth covering the principal, interest, and still keeping things going down the line, things could get really ugly if growth is even a bit below that. The municipality would have to choose between day to day expenses and interest payments, potentially.
I have a very naive question: What is the problem with letting these LGFV fail and debt disappear with them over a few years? My understanding is that it would create a bit of inflation but the volume would be manageable and inflation is not much of a problem in a growing economy.
LGFV do not look like a financial product that can be bought so there does not seem to be any risk of contagion.
This is all government matters so the moral hazard can be easily avoided if the government is willing to punish harshly the officials that put their cities in this situation. Financial punishment is not the only way to punish unwise risk taking.
Here's the thing: this sounds bad, but partly because of the massive, massive scale. However, everything in China sounds ridiculously big to me; the environmental problems, the amount of stuff being built, everything. So, my intuition for when "that's too big" turns into "that's so big it will go BANG pretty soon" is no good, when it comes to China. Thus, the question is, how big is this, on a China-everything-is-big kind of scale? What will be the thing that would make this stop? How do we know it's not just an early 90's S&L crisis kind of thing, that is, big but not catastrophic?
I'm not saying it's not a crisis, I'm just saying I can't tell if it's a crisis because it's China, everything seems way too big to me, and lots of it just continues that way for many years.
The difference between debts and environmental disasters is that debts can always be canceled or watered down.
Indeed China's MO is usually to do that indirectly every time, which is why articles like this have popped up like clockwork for the last decade in spite of China not facing a recession in that time. Counter cyclical fiscal stimulus always headed it off.
Just as I said the last time this story popped up: https://news.ycombinator.com/item?id=17542113 People cannot use their intuition built on a western context on China. Unlike western local governments whose taxes comprise of the majority of their funding Chinese local governments collect close to no tax. Their funding comes primarily from money borrowed from other parts of the government which is standard practice and not alarming.
An analogy is like a company whose sales department generate all the cash and the engineering department generates no cash and owe billions to the sales department. Is the eng department in crisis? Obviously not. Still, oversight needs to be exerted over the eng department to make sure that it doesn't overspend or develop projects that are low in ROI... an eternal challenge.
Interesting paper on LGFVs[1] which are "Local Government Finance Vehicles."
If you squint, it looks like an interesting parallel to the lending issues that plagued Japan in the 90's and eventually brought the economy there to a standstill. The monetary equivalent of "vapor lock" in a hydraulics system.
I am the first person to admit that the complexity of bond financing in the Chinese economy really challenges me because it operates on some fundamentally different assumptions about fiscal policy and monetary policy. That said, I'm not sure how they unwind that debt without sufficient domestic demand to keep the system operating.
If they were a third world country they could just devalue the RMB by 1000:1 and then settle the debt with devalued currency, but that option isn't really available to them.
[1] "The Law of China’s Local Government Debt: Local
Government Financing Vehicles and Their Bonds", D. Clarke -- https://sci-hub.tw/10.1093/ajcl/avx036
Here's something that seems simple and I've NEVER been able to get a straight answer to:
If Chinese wealth per capita is roughly 1/10th that of the average US citizen -- both in terms of median and mean -- and if Chinese wages are roughly 1/6th that of the average US citizen -- both in terms of median and mean... How on Earth are Chinese houses on average MORE EXPENSIVE per square foot than houses in the US?
Because you're comparing national average income to non-national housing prices.
The average house is not at all more expensive in China than in the US.
It is true that in particular cities like Beijing or Shanghai the average sits around $7-9k per square meter (divide by 10 roughly for square foot), far higher than the average in the US. (divide by ten roughly for square foot). That's way more than in the US. But then consider these are megacities with a GDP of roughly half a trillion dollars. About half a million millionaires live in Beijing, Shanghai and Hong Kong. These are the top tier cities of the 22nd century's superpower, prices are going to reflect the notion that property in these cities should keep its value and appreciate strongly.
Median wages are already on par in these cities with various eastern-european countries. And income inequality is among the worst in the world, so you've got this small percentage of people who can elevate property prices to ridiculous heights. Only Shanghai and Beijing each have a population equivalent to 25 times San Fransisco, so a few rich people adds up to ridiculous prices.
I'm not saying these prices necessarily make sense, I certainly wouldn't buy there. But it's also not impossible to see why they're this high.
Location, location, location, I would think: With more people and larger cities, there's more "prime" real estate at locations with high potential for economic networking. In this kind of situation, it's only natural that people will spend a greater percent of their income on housing (since the benefits of being at a prime location vs remote location are more stark)
The other factor is that the Chinese government places very strict controls on where rich people can "park" their money- Since they can't take large sums of money out of the country, they have resorted to using local real estate as a sort of gold substitute for stockpiling their $$$.
Because most Chinese people are in abject poverty and shouldn't even be considered a part of the market where those houses lie. The wealth-per-capita should be normalized to the population where it's actually concentrated, for which I've seen estimates circa ~100million.
Different cultural norm, Chinese are willing to spend 100% of their savings on buying house. And having a house is a prerequisite to getting permission from father/mother-in-law for marriage in Chinese culture.
the prices you've heard about are the top of the top. In many other cities in China, you can get much much cheaper housing. I know a family that just bought a 1500 sq ft, 3 bedroom apartment at the top of a skyscraper for a mere (100K in US dollars) - in Yuans of course. And, there are far more remote areas that are much cheaper than that.
Housing is a investment vehicle in China. From what I've read, a lot of housing is actually empty and is held strictly as an investment. That implies it is a speculation driven bubble that is going to pop when everything else goes upside down in China. Or maybe the Chinese government will achieve a "soft landing."
The incredible thing is that these homes are often not purchased with debt financing either, and when they do, it's with a much larger downpayment than in the US as required by law. Chinese citizens have a much higher savings rate compared to Americans.
Who's buying these bonds? I'm assuming it must be mostly Chinese investors and financial firms?
Also, does it ultimately matter with an economy as productive as China's? Other commenters are comparing it with Detroit, which has lost most of its tax base, so I'm not sure that's a fair comparison.
And, if they are state run funds/bond issuing, than isn't it roughly equivalent to any other kind of monetary stimulus? (genuinely asking, this isn't my area of expertise)
It seems like a lot of Chinese cities have equal to or greater debt than Detroit. How bad this is depends on the tax base of said cities and how the debt is structured, but it’s eyebrow raising at best.
As far as I understand, a lot of valuation of the risk in muni bonds is based around the assumption that municipalities won’t go bust together at once. It’s this way in the US. This let’s someone spread their money safely, in theory.
The Chinese economy is so export and manufacturing dependent, it wouldn’t surprise me to see a lot of cities go bust together at once if the economy shrinks. They have very little other economic activity to fall back on.
For my part, I think any good usage of debt requires transparency about the amount and purchase. Any entity, private or public, that tries to hide its total debt load is suspect at best. I would expect such an entity to have other hidden debts, and possibly be leveraged to an insane degree, hence the privacy.
China builds ghost cities and also tears down cities and combines them into new ones. They also have built bridges 26.4 miles long miles long over water (Jiaozhou Bay). Just the materials alone must cost a great deal even at the reduced prices the Government pays and the low wages for employees. Not to mention the huge Government security surveillance and incarceration system. China chides the USA for it's foreign wars but China is at war with it's population to control them, the cost must be similar or higher.
Please do not treat all infrastructure projects as money blackholes.
I'll just contribute a little bit about the Jiaozhou Bay bridge. My grandparents live near there. It actually makes much sense if you take a look at the map below:
Basically, Qingdao is already a mega city with over 6M population in urban area. But it just cannot expand because it is located on a peninsula (similar to San Francisco) with its back facing a big mountain. So it's kind of natural to expand on the other side for more and cheaper land. So to reach the other land, options are:
1. Connect the tip of the peninsula to the other side. This is shorter but you're connecting city centers together (Brooklyn-alike), which doesn't work well for cargo traffics (Qingdao is also a major seaport). Actually this tunnel is already built and many people use it for commuting.
2. Connect the seaport area inside the bay to the other side. This is what you mentioned. With that, cargo can reach factories on the other side in a faster fashion without crossing the city center.
3. Improve the highways around the bay to handle increased demand. First it's a lot longer, which is something you cannot change. Second it's not cheap either given you need to get more land and might need more time.
And 2's price tag is not that high (roughly the same cost as San Francisco - Oakland bay bridge). If you were the decision maker, would you want to build it?
BTW, with 1 & 2's open, the other side already officially became part of Qingdao metropolitan area and cross-bay subway will open this year.
China's incarceration rate, including people in detention centers and at least if you believe the numbers cited by Wikipedia, is less than a quarter of the USA's.
US also has a lot more assets though and is an already developed economy. China’s economy will inevitably slow and for an emerging market, their debt is significant. Also, this is only local Chinese debt and not even the full picture for that. According to nationaldebtclocks, China govt debt is $5.2 trillion on paper but they suggest multiplying by at least 3.25 to account for shadow banking not on the official ledgers and local govt debt the article was talking about.
It seems to me that China is riding easy money and sinking it into tangible assets that, beyond default, are at least usable and semi-permanent. You can't unbuild a bridge and get the money back. It may collapse in the future, but not before reaping benefits for the economy where it's sitting.
Something is seriously wrong pretty much everywhere.
We are at the end of generations of solving one bubble collapsing by inflating another one. There is a lot of money on paper. But in reality there are three main places where money can go.
1. The USA, which has been effectively printing money like crazy with low interest rates since 2008. This has been transferring wealth from the real economy to the paper economy.
2. Europe, whose common currency is unsustainable without political integration. There is no general support for political integration, and no reasonable way to untangle the common currency. (Plus Brexit will be a disaster.)
3. China, which has the largest asset bubble in history. When it pops they are likely to wind up in a deflationary spiral, like the one that Japan has been struggling with for decades since its real estate market collapsed in the early 90s. Our last deflationary spiral was during the Great Depression.
Of those options, investors see the USA as the least bad.
Money is both a medium of exchange and a store of value. The "medium of exchange" function is traditionally represented in accounting with the income statement - it's a measure of how much money changes hands in a given time period. So a company's GDP measures the total value of all transactions performed within a year.
The "store of value" function is traditionally represented by a company's balance sheet, which is a measure of how much value has been accumulated at a particular instant in time. So when local governments in China have $5.8T in debt, that means that some other entity has previously loaned them $5.8T, collectively, and at some point in the future, has a claim on that. Note that this time period might be very long; it's not unusual for debt terms to be 30 years (eg. with T-bills or mortgages). Note also that everybody's debt is somebody else's asset; for example, you could have $5.8T in debt where each local government just deposited their working capital in a bank in the next town over and borrowed from the town to the other side, with no actual outside holders. (This is actually fairly close to the situation with the U.S. national debt, where 50% of the debt is actually owned by other portions of the government - notably the Social Security trust fund and Federal Reserve - and another 10% is owned by state governments.)
Here's a classic parable that illustrates the difference:
60% doesn't seem that bad. Compare USA: 82%, UK 78%, Italy 120% etc. And at least China is still growing fast unlike say Italy which does have some issues.
When I look at the jump in defaults this year, all I can think about are all of the home loans people stopped paying in the lead up to the mortgage crisis and how they were systematized into the rest of the economy by securitization. If China's system was built around those so-called "implicit guarantees for debt," isn't it due for a similar or more severe correction?
It seems like the same story--different sector and different culture, same greed and assumptions.
Can anyone please do an explain like I am five on this? The article assumes lots of background which probably is fine considering their target audience.
I believe China is about to tank as hard as the Russian empire. There is going to be a revolution. What the trigger will be remains to be seen, but it can be just about anything. Most likely it will be something within that we see as inconsequential.
[+] [-] smacktoward|7 years ago|reply
In contrast to state governments in the U.S., most local governments in China are forbidden to borrow money directly.
Historically, land sales have been a large revenue source for local governments, but since the global financial crisis this revenue source has diminished. Yet local government spending, especially on infrastructure investments, has accelerated...
Detroit filed for bankruptcy with debts of $18 billion on July 18, but this is the average amount of debt for many Chinese cities. A 2012 audit of 36 local governments found $624.6 billion in debt -- suggesting there are at least a few Chinese cities with debt equal to, or in excess of, the $18 billion that sunk Detroit.
So the news is that what was understood to be ~$625 billion in debt six years ago has turned into $5.8 trillion in debt today. Which is, like, 322 Detroits.
[+] [-] apo|7 years ago|reply
Here's another article that goes into more detail:
Local government funding vehicles (LGFVs) are companies owned and funded by a local government in order to raise funds for municipal projects. These firms stem from the taxation system in China that allocates the lion’s share of revenue to the national government, and from regulations implemented in 1994 that prevent the government from selling bonds. This strict budgetary regulation was intended to promote sound financial management and prevent local governments from spending themselves into deficits. LGFVs became prominent after the Asian Financial Crisis of 1998 and the Great Financial Crisis of 2008 when central government stimulus packages put the onus on local governments to raise necessary funds. LGFVs are effectively state-owned enterprises (SOEs).
https://www.strangemarkets.com/chinese-lgfv-bonds-the-next-g...
[+] [-] i_cant_speel|7 years ago|reply
[+] [-] Nokinside|7 years ago|reply
Most of that $5.8 Trillion valuation is not going to vanish because they are real investments into infrastructure. Most problems come from wrong cash flow estimates, and lower than estimated returns and some nonprofitable investments. The actual potential loss or haircuts investors are facing is some percentage of that sum. Probably few $100's of billions, maybe even close to $1T.
The reason why there are defaults is because Chinese government wants to fight moral hazard problem that comes from bailing them out. The government will allow certain number of LGFVs to default to set an example (like Lehman Brothers) but if the credit squeeze starts to hurt "Chinese main street" they will step in.
[+] [-] sailfast|7 years ago|reply
I don’t doubt that it won’t be an entire haircut, but to say these function like regular bonds seems odd.
Is there a contagion concern here? What other products are collateralized using these? We saw this of course with well-rated packages of loans actually being manure. Anything like packaged LGFVs with hedges?
Asking because I have no idea and am legitimately curious about the possible downsides.
[+] [-] Kadin|7 years ago|reply
I could see that working for land development, maybe some infrastructure... but if they are selling bonds to cover day-to-day public affairs, that doesn't seem sustainable. If those expenses aren't covered by current tax revenue, where are they going to get the future revenue to pay the investors, plus interest, plus ongoing day-to-day expenses at that point?
Does anyone know what expectations or models they are using in issuing these, or what the buyers' assumptions are? That would seem to be important. If someone is buying a 30-year note expecting the tax base growth to be 8% p.a. over that 30 years, with that compound growth covering the principal, interest, and still keeping things going down the line, things could get really ugly if growth is even a bit below that. The municipality would have to choose between day to day expenses and interest payments, potentially.
[+] [-] Iv|7 years ago|reply
LGFV do not look like a financial product that can be bought so there does not seem to be any risk of contagion.
This is all government matters so the moral hazard can be easily avoided if the government is willing to punish harshly the officials that put their cities in this situation. Financial punishment is not the only way to punish unwise risk taking.
[+] [-] duxup|7 years ago|reply
I got the impression that they just weren't ready to respond and it was less so "hey let these guys fall to set an example".
[+] [-] rossdavidh|7 years ago|reply
I'm not saying it's not a crisis, I'm just saying I can't tell if it's a crisis because it's China, everything seems way too big to me, and lots of it just continues that way for many years.
[+] [-] crdoconnor|7 years ago|reply
Indeed China's MO is usually to do that indirectly every time, which is why articles like this have popped up like clockwork for the last decade in spite of China not facing a recession in that time. Counter cyclical fiscal stimulus always headed it off.
[+] [-] KaoruAoiShiho|7 years ago|reply
An analogy is like a company whose sales department generate all the cash and the engineering department generates no cash and owe billions to the sales department. Is the eng department in crisis? Obviously not. Still, oversight needs to be exerted over the eng department to make sure that it doesn't overspend or develop projects that are low in ROI... an eternal challenge.
[+] [-] ChuckMcM|7 years ago|reply
If you squint, it looks like an interesting parallel to the lending issues that plagued Japan in the 90's and eventually brought the economy there to a standstill. The monetary equivalent of "vapor lock" in a hydraulics system.
I am the first person to admit that the complexity of bond financing in the Chinese economy really challenges me because it operates on some fundamentally different assumptions about fiscal policy and monetary policy. That said, I'm not sure how they unwind that debt without sufficient domestic demand to keep the system operating.
If they were a third world country they could just devalue the RMB by 1000:1 and then settle the debt with devalued currency, but that option isn't really available to them.
[1] "The Law of China’s Local Government Debt: Local Government Financing Vehicles and Their Bonds", D. Clarke -- https://sci-hub.tw/10.1093/ajcl/avx036
[+] [-] onlyrealcuzzo|7 years ago|reply
If Chinese wealth per capita is roughly 1/10th that of the average US citizen -- both in terms of median and mean -- and if Chinese wages are roughly 1/6th that of the average US citizen -- both in terms of median and mean... How on Earth are Chinese houses on average MORE EXPENSIVE per square foot than houses in the US?
My brain just can't understand.
[+] [-] IkmoIkmo|7 years ago|reply
The average house is not at all more expensive in China than in the US.
It is true that in particular cities like Beijing or Shanghai the average sits around $7-9k per square meter (divide by 10 roughly for square foot), far higher than the average in the US. (divide by ten roughly for square foot). That's way more than in the US. But then consider these are megacities with a GDP of roughly half a trillion dollars. About half a million millionaires live in Beijing, Shanghai and Hong Kong. These are the top tier cities of the 22nd century's superpower, prices are going to reflect the notion that property in these cities should keep its value and appreciate strongly.
Median wages are already on par in these cities with various eastern-european countries. And income inequality is among the worst in the world, so you've got this small percentage of people who can elevate property prices to ridiculous heights. Only Shanghai and Beijing each have a population equivalent to 25 times San Fransisco, so a few rich people adds up to ridiculous prices.
I'm not saying these prices necessarily make sense, I certainly wouldn't buy there. But it's also not impossible to see why they're this high.
[+] [-] drcode|7 years ago|reply
The other factor is that the Chinese government places very strict controls on where rich people can "park" their money- Since they can't take large sums of money out of the country, they have resorted to using local real estate as a sort of gold substitute for stockpiling their $$$.
[+] [-] bordercases|7 years ago|reply
[+] [-] fspeech|7 years ago|reply
[+] [-] soulchild37|7 years ago|reply
[+] [-] megaman8|7 years ago|reply
[+] [-] gvb|7 years ago|reply
Ref: https://en.wikipedia.org/wiki/Under-occupied_developments_in...
[+] [-] JBReefer|7 years ago|reply
https://www.elledecor.com/life-culture/fun-at-home/news/a765...
[+] [-] zjaffee|7 years ago|reply
[+] [-] jjoonathan|7 years ago|reply
[+] [-] acover|7 years ago|reply
Are the number of people per square foot much higher? I know in Tokyo people's expectations are very different.
[+] [-] naveen99|7 years ago|reply
[+] [-] kernoble|7 years ago|reply
Also, does it ultimately matter with an economy as productive as China's? Other commenters are comparing it with Detroit, which has lost most of its tax base, so I'm not sure that's a fair comparison.
And, if they are state run funds/bond issuing, than isn't it roughly equivalent to any other kind of monetary stimulus? (genuinely asking, this isn't my area of expertise)
[+] [-] village-idiot|7 years ago|reply
It seems like a lot of Chinese cities have equal to or greater debt than Detroit. How bad this is depends on the tax base of said cities and how the debt is structured, but it’s eyebrow raising at best.
As far as I understand, a lot of valuation of the risk in muni bonds is based around the assumption that municipalities won’t go bust together at once. It’s this way in the US. This let’s someone spread their money safely, in theory.
The Chinese economy is so export and manufacturing dependent, it wouldn’t surprise me to see a lot of cities go bust together at once if the economy shrinks. They have very little other economic activity to fall back on.
For my part, I think any good usage of debt requires transparency about the amount and purchase. Any entity, private or public, that tries to hide its total debt load is suspect at best. I would expect such an entity to have other hidden debts, and possibly be leveraged to an insane degree, hence the privacy.
[+] [-] bobthepanda|7 years ago|reply
[+] [-] gscott|7 years ago|reply
[+] [-] azurezyq|7 years ago|reply
I'll just contribute a little bit about the Jiaozhou Bay bridge. My grandparents live near there. It actually makes much sense if you take a look at the map below:
https://www.google.com/maps/@36.070127,120.2319581,82460m/da...
Basically, Qingdao is already a mega city with over 6M population in urban area. But it just cannot expand because it is located on a peninsula (similar to San Francisco) with its back facing a big mountain. So it's kind of natural to expand on the other side for more and cheaper land. So to reach the other land, options are:
1. Connect the tip of the peninsula to the other side. This is shorter but you're connecting city centers together (Brooklyn-alike), which doesn't work well for cargo traffics (Qingdao is also a major seaport). Actually this tunnel is already built and many people use it for commuting.
2. Connect the seaport area inside the bay to the other side. This is what you mentioned. With that, cargo can reach factories on the other side in a faster fashion without crossing the city center.
3. Improve the highways around the bay to handle increased demand. First it's a lot longer, which is something you cannot change. Second it's not cheap either given you need to get more land and might need more time.
And 2's price tag is not that high (roughly the same cost as San Francisco - Oakland bay bridge). If you were the decision maker, would you want to build it?
BTW, with 1 & 2's open, the other side already officially became part of Qingdao metropolitan area and cross-bay subway will open this year.
[+] [-] morsch|7 years ago|reply
https://en.wikipedia.org/wiki/List_of_countries_by_incarcera...
[+] [-] thelasthuman|7 years ago|reply
Did you forget about the drug war here in the USA?
[+] [-] diminish|7 years ago|reply
I'm curious if the prophecy will self-fulfill in 10 years or so. I'm also willing to hear independent voices and analysis.
[+] [-] mrep|7 years ago|reply
[+] [-] paulpauper|7 years ago|reply
[+] [-] fspeech|7 years ago|reply
Might as well read the source for yourself if you are interested in the issue.
[+] [-] and-then|7 years ago|reply
http://www.usdebtclock.org/
[+] [-] propman|7 years ago|reply
[+] [-] intopieces|7 years ago|reply
[+] [-] bsaul|7 years ago|reply
And now that reminds me of another number. Apple and Amazon have 1 trillion valuation.
I don't understand if my scales are wrong or if something is seriously wrong pretty much everywhere.
[+] [-] btilly|7 years ago|reply
We are at the end of generations of solving one bubble collapsing by inflating another one. There is a lot of money on paper. But in reality there are three main places where money can go.
1. The USA, which has been effectively printing money like crazy with low interest rates since 2008. This has been transferring wealth from the real economy to the paper economy.
2. Europe, whose common currency is unsustainable without political integration. There is no general support for political integration, and no reasonable way to untangle the common currency. (Plus Brexit will be a disaster.)
3. China, which has the largest asset bubble in history. When it pops they are likely to wind up in a deflationary spiral, like the one that Japan has been struggling with for decades since its real estate market collapsed in the early 90s. Our last deflationary spiral was during the Great Depression.
Of those options, investors see the USA as the least bad.
[+] [-] nostrademons|7 years ago|reply
Money is both a medium of exchange and a store of value. The "medium of exchange" function is traditionally represented in accounting with the income statement - it's a measure of how much money changes hands in a given time period. So a company's GDP measures the total value of all transactions performed within a year.
The "store of value" function is traditionally represented by a company's balance sheet, which is a measure of how much value has been accumulated at a particular instant in time. So when local governments in China have $5.8T in debt, that means that some other entity has previously loaned them $5.8T, collectively, and at some point in the future, has a claim on that. Note that this time period might be very long; it's not unusual for debt terms to be 30 years (eg. with T-bills or mortgages). Note also that everybody's debt is somebody else's asset; for example, you could have $5.8T in debt where each local government just deposited their working capital in a bank in the next town over and borrowed from the town to the other side, with no actual outside holders. (This is actually fairly close to the situation with the U.S. national debt, where 50% of the debt is actually owned by other portions of the government - notably the Social Security trust fund and Federal Reserve - and another 10% is owned by state governments.)
Here's a classic parable that illustrates the difference:
http://scienceblogs.com/evolutionblog/2009/06/15/an-amusing-...
[+] [-] hindsightRegret|7 years ago|reply
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[+] [-] rahimnathwani|7 years ago|reply
[+] [-] tim333|7 years ago|reply
>"And that's a debt iceberg with titanic credit risks," they added, estimating that the ratio of all government debt to GDP was 60 percent last year. https://www.cnbc.com/2018/10/16/china-hidden-local-governmen...
60% doesn't seem that bad. Compare USA: 82%, UK 78%, Italy 120% etc. And at least China is still growing fast unlike say Italy which does have some issues.
[+] [-] ordinaryradical|7 years ago|reply
It seems like the same story--different sector and different culture, same greed and assumptions.
[+] [-] kick_in_the_dor|7 years ago|reply
[+] [-] nafizh|7 years ago|reply
[+] [-] unknown|7 years ago|reply
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[+] [-] brainpool|7 years ago|reply