Wednesday, April 7, 2010

China and debt

Michael Pettis, a professor at the Peking University is fairly well trusted on Chinese financial matters. He talks about China and debt. He talks about domestic Chinese consumers subsidizing capital investment with enforced low returns to savers. He calls this a definition of the Asian growth model. Bottom line, when the China bubble is deflated, Chinese households will suffer disproportionately with low consumption for years..

Some helpful definitions:
NPL - Nonperforming Loan
SOE - State Owned Enterprise

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