China’s economy picks up as companies pile on debt, survey finds
A short-term alleviation in China’s growth concerns could be a welcome turn of events for global investors. The Shanghai composite was one of the worst performing stock indexes in the world last year, but is up more than 20 percent for 2019 so far.
“In China what really regulates growth is, at least at the moment, the availability of liquidity. And the availability of liquidity is a government-directed thing,” David Wong, partner at Asian alternative investment group PAG, said during a panel at the AVCJ China Forum in Beijing last week.
Besides, debt fears could be overblown, according to Wong. From a leverage perspective, the dollar-denominated debt of the Chinese government and corporations in the country is “minuscule” compared with the levels of most southeast Asian countries during the Asian Financial Crisis in the late 1990s, he said.
“Given this (and the tax revenue base), I think we’re not at an overleveraged situation in China,” Wong said. “Therefore in the foreseeable future this supercycle of growth would continue, until the point that leverage cannot continue to be sustained, even within a closed capital account system.”