EDITOR, The Tribune
The Bahamas is captivated by the drama of Baha Mar, The Pointe and other possible Chinese investments in the country.
However an interesting commentary article in the London Times on Friday by the economics editor of Sky News, Ed Conway, entitled “China’s titanic debt is heading for an iceberg” indicates that things economically are not going well in China at the moment.
The article starts by referring to the recent launching of a replica of Titanic in Sichuan province which will simulate the crashing of the ship into the iceberg and goes on to explain that China’s debt is on the verge of doing exactly that.
The Governor of the Bank of England recently also referred to the Chinese as piling up debt through the non-financial sector with the debt mountain growing to 260 per cent of national income. If this growth continues and the country is committed by President Xi Jinping to a 6.5 per cent growth rate - which it cannot sustain, according to Mr Conway - then the bubble will eventually burst.
This will make the 2008 Lehman Brothers crash look like a party. Cash is being pumped into the domestic Chinese market at a fast rate to try to accomplish this 6.5 per cent target - and who in China dares to disagree with the President?
As the article continues to say the problem is not so much the scale of the debt but, as he describes it, the plumbing beneath the surface. The more complex this becomes the harder it is to clean up. Who is lending to whom?
A Chinese recession with no more cheap goods would be a shock for all of us. But more so perhaps in the Bahamas as our tourist industry is beginning to very much rely on Chinese capital to fund it and, probably, also our major tourist growth is expected to come from China. We have another high level Government delegation winging its way to China to vet the new owners of Baha Mar and hopefully they find out good things about them. But in bad times the first to suffer will be the overseas investments and we are a minnow relying on a whale to make a fishing metaphor.
PATRIC H THOMSON
Nassau
December 4, 2016
Comments
truetruebahamian 7 years, 4 months ago
Don't forget the empty Chinese cities which took over agricultural land and are now decaying. They were built as tokens and remain uninhabited. Waste! Pure and simple! Central planning with no significant result only negative management of land and resouces.
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