Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Join the forum, it's quick and easy

Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

Would you like to react to this message? Create an account in a few clicks or log in to continue.
Established in 2006 as a Community of Reality

Many Topics Including The Oldest Dinar Community. Copyright © 2006-2020


    The horror of domestic debt threatens the world's second-largest economy

    Rocky
    Rocky
    Rocky
    Admin Assist
    Admin Assist


    Posts : 278598
    Join date : 2012-12-21
    • Post n°1

    The horror of domestic debt threatens the world's second-largest economy Empty The horror of domestic debt threatens the world's second-largest economy

    Post by Rocky Mon 04 Dec 2017, 2:37 pm

    The horror of domestic debt threatens the world's second-largest economy
    The horror of domestic debt threatens the world's second-largest economy 640
    The crisis between the central government and local governments behind China's debt jump 04 Dec 2017 08:27 PM
    Editing - Noha Al-Nahhas:
    China's domestic debt is a problem plagued by the world's second-largest economy, with alarming voices, especially with an erroneous relationship between China's central government and local governments.
    In a report by The Economist, tensions between the central and local governments have pushed debt to dangerous levels in 2015, and even if a change of rules has solved the problem for some time, the problem appears to be re-emerging. Again. "
    The enormity of China has been a cause of trouble, as a result of the central government's conviction that local governments have a great deal of autonomy and are entitled to exercise greater control over them.
    Under a strange financial system in China, local governments in cities and rural areas have very limited authority over revenue collection authorities, and until 2014 they could not borrow or issue bonds without the permission of the central government.
    Local governments rely on fixed quotas of certain taxes, such as 50% VAT and 40% personal income tax.
    This was not enough in any form, although local governments received almost half of total tax revenues, but at the same time accounted for two-thirds of government spending, and provincial inconsistencies are even more evident.
    How did the local government face a lack of funds?
    To cope with this disparity, local governments often use remittances from the central government to continue. On average these transfers represent half of domestic spending, ultimately giving the central government more leverage at lower levels.
    Of course after these restrictions are imposed by the central government on the local, the latter will often look for ways to escape centralized control.
    In the 1990s, a vague type of investment companies emerged and was under the control of local governments, known as "local government financing mechanisms". They used state-owned land and contributed to local companies as security to raise funds from banks, the bond market and investors.
    The purpose was to build houses, roads and other infrastructure factors, but this was not highly regulated, and because these financing mechanisms were not banks, they were not subject to the same financial rules.
    The establishment of such projects has also contributed to the fact that the state has ignored budget constraints and has often been kept out of public opinion.
    The new option causes a crisis
    By 2013, the growth of these loans was a warning to the government, raising funds to 7 trillion yuan ($ 1 trillion) or 13 percent of GDP.
    By the end of 2015, China's total domestic government debt, which mostly includes "local government financing mechanisms," totaled 15 trillion yuan or 24 percent of GDP, which is not large compared to China's total debt at 250 percent of GDP at the time.
    Although this percentage is not large, most of the "local government financing mechanisms" were extra-budgetary and not reported.
    How did China face the crisis?
    In 2014, China's central government began to move towards preventing the local government from increasing "financing mechanisms" and also passed a government's right to issue bonds and use funds to refinance the "financing mechanism" debt.
    All of the debt is supposed to be converted into bonds by 2018, which means the issuance of 15 trillion yuan.
    As the local government in China aims to impose restrictions on the domestic debt ceiling exporting, reducing new debt, the conversion of debt to bonds would help local authorities because bond yields are less than debt financing mechanisms.
    The central government has also blocked some evasive incentives used by local governments to attract private investors.
    Local governments have begun to implement some reforms, including assessments of borrowing decisions by local officials during the annual performance reviews.
    The Chinese government's five-year plan, which came into force in 2016, began to implement new revenue-sharing deals between the local and central levels .
    Has the nightmare of domestic debt ended?
    All these efforts were a harbinger of the end of the crisis, until the Chinese president announced in July that these mechanisms are not working. He said at a conference on the financial system that local government debt remains one of the biggest threats to China's financial stability.
    "Local officials are re-categorizing the loans so they do not appear in official statistics," said Hoss Sung of the Paulson Institute.
    Lack of trust between local and private governments is a cause of the continuing debt problem, and a clearer division of tax authorities between the public and private sectors should be completed.
    In remarks to China's central bank governor, he said China 's financial system has become more vulnerable because of rising credit levels in the country.
    Economists have also predicted an increase in China's debt over the next five years, representing debt to GDP at 327 percent, signaling a new financial crisis.


    https://www.mubasher.info/news/3196310/%D8%B1%D8%B9%D8%A8-%D8%A7%D9%84%D8%AF%D9%8A%D9%88%D9%86-%D8%A7%D9%84%D9%85%D8%AD%D9%84%D9%8A%D8%A9-%D9%8A%D9%87%D8%AF%D8%AF-%D8%AB%D8%A7%D9%86%D9%8A-%D8%A3%D9%83%D8%A8%D8%B1-%D8%A7%D9%82%D8%AA%D8%B5%D8%A7%D8%AF-%D9%81%D9%8A-%D8%A7%D9%84%D8%B9%D8%A7%D9%84%D9%85?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+ar%2FISX%2Fnews+%28ISX+Arabic+News%29
    • Back to top
      Current date/time is Sat 05 Oct 2024, 11:48 am