CHINA’S COMING LOST DECADE
China is drafting plans for bond purchases to boost liquidity and shore up the country's $2.6 trillion edifice of local government debt, becoming last of the world's big economic powers to resort to quantitative easing.
The news propelled the Chinese stock market to a seven-year high yesterday (4/27), helped by fevered talk of a merger between Sinopec and PetroChina, the country's two oil giants..
The Shanghai Composite index of equities has risen by 40% this year and 125% since June, even as the economy grapples with a property slump.
Corporate profits fell 2.6% in the first quarter and swathes of industry are mired in recession. "The operational situation of industrial enterprises remains grave," said the National Bureau of Statistics.
Total debt has reached 250% of GDP, if all forms of trusts, shadow banking, and off-shore lending are included. "No country has ever survived that sort of rise without something bad happening," said Nariman Behravesh, global economist for IHS Global Insight.