Topic: Moody’s Cuts China Credit Outlook to Negative on Rising Debt (Read 105 times)

Speaking of the BTC implications, this should make in theory a few chinese go from real estate investment to either gold or bitcoin but...there is a problem with the second one! ;)So don't get your hopes up on anything significant moving into BTC, unfortunately.

I don't know why, but it makes me think that in this thread, if you put "US" where it says "China", you would get a lot more responses.

This has been the path they are on for a while now, I get that building magnificent things are great, they do have some of the most amazing structures made during the modern era, if you look all the things made after 2000+ you will see that China has some of the most astonishing structures ever, but that came with the cost of nearly bankrupting the nation, and everyone is paying for it. The logic is simple, why did they think that they are the only people who are using their money or credit on something like this?

I have a feeling the average Chinese person is going to flock to gold rather than bitcoin if they have a choice.  I'm still not clear on how legal or even popular bitcoin is in China, but I'd imagine the government has the same opinion about it as the US government does, i.e, that it's a threat to their power over their citizens.  Why gold ownership doesn't represent the same threat is beyond me, but whatever.

This has been the path they are on for a while now, I get that building magnificent things are great, they do have some of the most amazing structures made during the modern era

Moody’s Cuts China Credit Outlook to Negative on Rising Debt

TLDR
The real estate is so much in debt and local government rely so much on sales of land for those that is a vicious circle in which money has to be put in to keep a thing that just redistributes money around with a lot of inefficiency.

So the government has to bail out local governments and real estate constructors so they don't go bankrupt and end up bankrupting the govemermnt itself, that's why the public debt of China is somewhere between 250% and 300% depending on what statistics China itself publishes, but the money that kept funding this debt is not in danger as the real estate market cools so suddenly a ton of it becomes impossible to pay back.

Speaking of the BTC implications, this should make in theory a few chinese go from real estate investment to either gold or bitcoin but...there is a problem with the second one! ;)So don't get your hopes up on anything significant moving into BTC, unfortunately.

This has been the path they are on for a while now, I get that building magnificent things are great, they do have some of the most amazing structures made during the modern era, if you look all the things made after 2000+ you will see that China has some of the most astonishing structures ever, but that came with the cost of nearly bankrupting the nation, and everyone is paying for it.

Can't believe that their dumbass government is actually thinking of invading Taiwan in between all of this.

In light of China's government's consistently stated policy objective, over the medium term, Moody's expects its property sector to remain smaller in proportion to the entire economy than it was before the property correction that started in 2021. As a result, RLGs face a structural loss of land sales revenue, which accounted for 37% of their revenue (excluding transfers from the central government) in 2022. Regions that relied most heavily on land sales are unable to materially offset the loss in revenue from other sources and will face financial strain for the foreseeable future, in Moody's view. Loss of land sales revenue reduces the ability of RLGs to support LGFVs and other local SOEs, including some entities highly reliant on RLG funding. Moody's expects further evidence of crystallization of contingent liabilities to materialize, which means that financial support to RLGs and SOEs will be provided by the government and wider public sector.

Instances of LGFV and local SOE financing stress have increased in the past year, and in Moody's view, market financing will remain challenging for entities from provinces such as Yunnan and Guizhou, where domestic bond market spreads remain very wide. More generally, if RLG support is durably impaired, debt sustainability will be at risk for LGFVs and local SOEs with particularly high leverage and/or low revenue coverage of interest payments.

Moody's estimates that around one third of the amount of SOE debt outstanding – equal to about 40% of GDP – has interest coverage below 1, which generally indicates weak debt sustainability.

These developments include the central government's approval for RLG bond issuances of over RMB1.3 trillion between 1 October and 7 November 2023 for repayment of upcoming LGFV bond maturities for the weakest provinces; the central government's announcement of a planned RMB1.0 trillion special treasury bond issuance to fund RLG post disaster construction; and a RMB1.6 trillion increase in central government transfers to RLGs in 2022 compared to 2021, which partly but only temporarily offset the RMB2.0 trillion of lost land sales revenue.