Financial Advice for Retirement, Social Security, IRAs and Estate Planning

Inside China’s Economic Problems

Published on: Oct 26 2018

China’s growth has slowed, its currency is down, and the stock market is having problems. This article discusses the thoughts of two economists who have studied China and believe the problems are bigger than most people realize. They point out that in addition to its trade conflicts with the U.S., China is trying to restructure its economy and has a lot of nonproductive debt.

China has also faced resistance over debt associated with its investments in infrastructure projects in other countries that are part of its One Belt, One Road (OBOR) project. Those investments in port infrastructure and related assets are financed by debt advanced by China to local country governments. Eight countries including Djibouti, Kyrgyzstan and the Maldives that are part of the OBOR project will find themselves vulnerable to above-average debt, according an analysis by the Center for Global Development, a nonprofit research organization.

In some cases, notably in Sri Lanka, the inability of the local government to repay the debt has resulted in China taking over the assets. “You’re seeing in Sri Lanka a lot of pushback against this debt, which when defaulted on results in a Chinese takeover — a lot of resentment,” said Meyer. “In that respect the infrastructure investment has not worked quite as planned.”

 

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