Stimulus — $195 billion, and what do you get?
Business & Technology
The answer, as the old song goes, is “another day older, and deeper in debt.” Bloomberg reports (via SCMP): “China’s burst of local bond issuance is supposed to fund roads, affordable homes and other infrastructure developments that will help support its flagging economy.” The report says that by the end of September, provincial authorities “had already raised 92 percent of the 1.35 trillion yuan ($195 billion) worth of special infrastructure bonds that the central government has targeted for the entire year.”
- But Bloomberg’s analysis shows that around 42 percent of the such bonds sold since August “are earmarked for ‘land reserves,’ which means compensating farmers for property acquisition or preparing the acreage for future development.”
- This means the stimulus may not stimulate — “the economic boost of the debt creation will be less immediate than if it was used to build motorways or redevelop substandard housing straight away.”
