Warning: Chinese Local Debt Could Create Bigger Crisis than US Housing Implosion
from Naked Capitalism:
Wednesday, April 17, 2013
Vice Chairman of Chinese Accounting Association Warns Chinese Local Debt Could Create Bigger Crisis than US Housing Implosion
On the one hand, Bloomberg today tells us retail demand for stocks is as hot as ever:
Over the last few weeks, every down move has been met with buyers that have come in, Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp., said by telephone. His firm has $2.08 trillion in client assets. People on the sidelines are waiting for a pullback to get into the market that theyve missed for the past six months. Were seeing more of that today.
On the other, we have someone well-placed in China telling the world that its local debt is a train wreck waiting to happen, a classic Minksy Ponzi unit, but the timing of the unraveling is uncertain. And the source is an authority and not the sort one would expect to make remarks like that casually.
The Financial Times tells us the alert comes from Zhang Ke, vice chairman of the Chinese accounting association, who said his accounting firm, ShineWing, had virtually stopped signing the financial statements for bond sales by local governments. He described the debt as out of control with the potential to cause a bigger-than-housing-crisis level bust. But since the obligations can still be rolled, who knows when the dubious debt will fall under its own weight. As the article explains:
http://www.nakedcapitalism.com/2013/04/vice-chairman-of-chinese-accounting-association-warns-chinese-local-debt-could-create-bigger-crisis-than-us-housing-implosion.html