Financial

China Financial Analysis

The qualitative issues for China’s financial strength include the true value of China’s assets and liabilities.  The assets include real estate, stock market, corporate and infrastructure values and the libaiblities include corporate, household, local government and soverign debt.

Financial Framework

The China financial framework has two Tier 2 categories: assets and liabilities. The Tier 3 asset categories include real estate, securities and deposits and savings. The Tier 3 categories for liabilities include direct debt and contingent and unfunded liabilities.

ChinaFinancialFramework

You can see photos and descriptions of Tianjin, Shanghai, Orods, South China Mall and other assets by clicking on the menus for the following pages: China Home, Scenarios, Economic and Synthesis pages.

True Asset Values: Real Estate

Tianjin – An Empty Rockefeller Center

The financial district of Yujiapu in the port city of Tianjin was designed to to be a rival to Manhattan. The government has spent billions building replicas of Rockefeller Center, Lincoln Center, and are building China’s largest high-speed rail station here. It is empty and mostly abandoned.

Tianjin - A new - but empty - Rockefeller Center
Tianjin – A new – but empty – Rockefeller Center

Ordos – A Modern Ghost City

Ordos High Rises

Bridge To Nowhere

Bridge To Nowhere

True Asset Values: Shanghai & Shenzhen Stock Markets

The same principles apply to making decisons about China. The political, social, economic and financial elements that drive China are all interconected & dynamic. ThinkSheetTM China provides a unique multi-scenario tool for managing the drivers and their interconnections and changes under the complex, rapidly-changing conditions of the global economy.

Market Cap Increased 100% in 5 Months
Market Cap Increased 100% in 5 Months

The Positive View

The same principles apply to making decisons about China. The political, social, economic and financial elements that drive China are all interconected & dynamic. ThinkSheetTM China provides a unique multi-scenario tool for managing the drivers and their interconnections and changes under the complex, rapidly-changing conditions of the global economy.

The Negative View

The same principles apply to making decisons about China. The political, social, economic and financial elements that drive China are all interconected & dynamic. ThinkSheetTM China provides a unique multi-scenario tool for managing the drivers and their interconnections and changes under the complex, rapidly-changing conditions of the global economy.

True Liabilities: China Aggregate Debt

The spectacular volatility in Chinese stocks the past two weeks is a reminder that, for all its size, China remains a developing economy with an immature financial system. As stock prices soared more than 100% in the past year, so did margin lending, estimated at $238.5 billion last week. That debt probably added to the price swings, with the Shanghai Composite Index down 19% since June 12 and 7.4% on Friday. 

Broad Overleverage

Property developers, local governments and state-owned enterprises are also broadly overleveraged. Despite Beijing’s attempts to rebalance the economy from investment to consumption, inefficient borrowing continues to expand. So how concerned should the world be about Chinese debt?

A recent McKinsey Global Institute report put total borrowing—by individuals, companies and government—at 282% of GDP in 2014. That’s extraordinarily high for a developing economy, and up from 158% of GDP as recently as 2007, primarily due to Chinese bank loans to local governments, SOEs and real estate developers.

China Relative Debt

ChinaDebtExtract

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