August 16, 2017

If you were to read only one thing…

FT – IMF warns China over ‘dangerous’ levels of debt – Tom Mitchell 8/15

  • “In an annual review of the world’s second-largest economy, IMF staff said China’s annual economic growth would average 6.4% in 2018-20, compared with a previous estimate of 6%. The IMF is also predicting that the Chinese economy will expand 6.7% this year, up from its earlier forecast of 6.2% growth.”
  • “The Chinese government, which pledged to double the size of the economy between 2010 and 2020, has tolerated a rapid run-up in debt in order to meet its target. ‘The [Chinese] authorities will do what it takes to attain the 2020 GDP target,’ the IMF said.”
  • “As a result, the IMF now expects China’s non-financial sector debt to exceed 290% of GDP by 2022, compared with 235% last year. The fund had previously estimated that debt levels would stabilize at 270% of GDP over the next five years.”
  • “’International experience suggests that China’s current credit trajectory is dangerous with increasing risks of a disruptive adjustment,’ the IMF said in the strongly worded report.”
  • “In the aftermath of the global financial crisis, Chinese authorities unleashed a lending spree that more than quadrupled total debt to $28tn at the end of 2016.” 
  • “In its report, the IMF noted that China’s ‘credit efficiency’ had deteriorated sharply over the past decade, with ever larger amounts of money needed to generate the same amount of growth. ‘In 2008, new credit of about Rmb6.5tn was needed to raise nominal GDP by Rmb5tn,’ the fund said. ‘In 2016 it took Rmb20tn in new credit.’”
  • “The IMF added that had the Chinese government not turned on the credit taps, average real GDP growth in the five years to 2016 would have averaged 5.3% rather than 7.3%.”

Perspective

WSJ – Daily Shot: John Burns Real Estate Consulting – Gross Govt Debt as % of GDP v 10-Yr Bond Yield –  8/15

Worthy Insights / Opinion Pieces / Advice

FT – Shell’s strategic move into electricity – Nick Butler 8/13

  • Shell is thinking ahead – getting into the electricity supply business (to industrial and commercial users).

Real Estate

WSJ – Daily Shot: John Burns Real Estate Consulting – Home Value Index –  8/15

Energy

WSJ – Daily Shot: Dealogic – Oil & Gas High Yield Bond Issuance 8/14

WSJ – Daily Shot: IHS Markit & Houston Chronicle – Pumped Water into Hydraulic Fracturing Wells –  8/15

China

FT – China’s economy is addicted to debt – Jamil Anderlini 8/14

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