High Speed Rail Threatens China Collapse

Three Times the Debt of Evergrande!

What is wrong with China? Nothing that a massive financial collapse across several sectors wouldn’t solve. China is drowning in debt across its economy. The high speed rail system — far from being the booming success claimed by China pimps — is yet another indicator of debt-fueled decline.

Evergrande, based in Shenzhen, has been teetering on the edge of bankruptcy for months as it defaults on loan after loan and the major credit rating agencies lower its rating to junk status. The group owes a total of $305 billion and that debt is both offshore in dollar loans as well as domestic unregulated loans from what are termed WMPs or wealth management products. As its finances implode and unit apartment sales plunge, tens of thousands of prospective apartment owners are threatened with having paid for unfinished apartments. To date the central bank of China has not intervened but speculation grows that a state bailout of the group is days away in order to prevent a systemic financial contagion. The reason is apparently that Evergrande is only the tip of a very debt-bloated China corporate sector iceberg.

Global Financial Predators Feud Over China Investment Risk

China’s high speed rail has three times the debt of Evergrande (!) and that debt is growing daily. But that too is barely a tip of the iceberg of China’s distressed financial underbelly. After the 2008 global financial deleveraging crisis, China was increasingly forced to rely on Ponzi scheme financing to bolster its financial growth. The resulting instability crisis has grown exponentially, and it is becoming more and more difficult to cover up.

The high speed rail facade is yet another loser disguised as a winner. The perverse incentives from the central government favoring high speed rail have distorted China’s transportation infrastructure in a very destructive manner.

There is one big lie in the video above. It is true that China wants to cut coal consumption. But the reason is not climate change, it is acute and deadly toxicity of the air combined with communist party difficulties with coal exporter Australia. China cannot afford to pay its power bill!

China’s coal plants are inefficient and dirty. The state owned enterprises are highly indebted and many would be economically unfeasible if not for the party connection. This drags the entire economy down and can only get worse.

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2 Responses to High Speed Rail Threatens China Collapse

  1. muunyayo says:

    Are you some kind of anti-China shill?

    China’s industrial economy is untouchable. And that’s why China has steamrolled right over the United States.

    There is nothing that can challenge the reality of the power of the Chinese Civilizational Nation-State.

    • alfin2101 says:

      It is possible for individuals to look at roughly similar data and arrive at different conclusions. A long time ago I stopped debating religion because to do so is the height of ridiculousness. The same is true to a large extent for political ideology and a number of other ideological categories.

      It is wisest to stay away from absolute categorical statements such as “There is nothing that can challenge the reality of the power of the Chinese Civilizational Nation-State,” “China’s industrial economy is untouchable.” or similar claims. Stick with the data and watch the trends. If a person loses their life savings based upon a misreading of trends, then that is a mistake that almost anyone might make in a state of enthusiasm. But if he loses his life savings based upon ideological set beliefs, there is no excuse for that.

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