China waiting for a crisis : Andy Xie
Government must cut spending or wake up to a messy reckoning
BEIJING (Caixin Online) — Bank loans and money supply rose sharply in January. The timing of the Spring Festival may have distorted the data. Still, there are signs that many local governments with new leaders want to try an old trick, pushing fixed-asset investment (FAI) to create gross domestic product and fiscal revenue. This would turn bank loans into GDP and fiscal revenue.
Local governments are already heavily in debt. Pushing FAI would keep them liquid through new loans. It is essentially a pyramid scheme and can go on as long as the banks are willing and able to lend. But constraints have appeared.
