While emerging economies may appear to have moderate debts (to China), the data could actually be a major misrepresentation; and if it were, then the IMF would certainly have a lot to discuss over a possible crisis (similar to the one in 2008). The data, states Stockman, can be unreliable due to hidden debt in the form of off-balance-sheet borrowing. Hidden debt is rarely found before it is too late.
The data cannot be trusted because it does not include some projects {funded by China}, lenders, or borrowers, trade finance (domestic and international trade transactions), and currency-swap agreements (a foreign exchange derivative between two institutions to exchange the principal and/or interest payments of a loan in one currency for equivalent amounts, in net present value forms, in another currency). This last bit is a bit confusing to me..if the amounts are set in currency exchanges, why are there hidden costs?
I personally liked this reading because it was clear and short. However, I wish Stockman talked about the similarities of emerging economies' financial crises. He briefly stated them (significant slowdown in economic growth and exports, unwinding of asset price booms, growing current account and fiscal deficits, etc), but did not expand. Why are hidden costs so much more important? By how much does he think the debt could be off?
The last question I have regards China's economy. Obviously, China's collapse is hurting the global economy more but how so? I hope that we read an article devoted entirely to the Chinese economy since it has had major impacts in the last decade, plus. Why would China lend so much money to now be in a tough spot? Were Chinese Economists wrong? Will the Chinese economy "bounce back"- it's not as bad as we thought, because of hidden debts to China? Was my sister's four years of studying Mandarin for nothing?
No comments:
Post a Comment