China’s Belt and Road Investments Are Extraordinary
1 June 2017
EIRNS — China’s issuance of credit to build up other [particularly Asian and African] economies through new infrastructure platforms, continues to amaze U.S. and European econonometric groups trying to map it — like PricewaterhouseCoopers, London School of Economics, Boston Consulting Group, and lately Wharton Business School. In a Wharton School newsletter published May 30, under the envious title "U.S. Needs an Asia Play To Prevent China Dominance," the magnitude of this credit issuance is measured in one way.
The authors write that funds already invested in, or firmly committed to, the growing number of Belt and Road projects outside China, by China’s credit institutions, have come to total $312 billion as of the end of March 2017. This is in a period of less than three years since President Xi’s announced One Belt, One Road initiative took shape; and only involves investments outside China’s own economy. Moreover, international lenders, including those initiated by China — World Bank, AIIB, Silk Road Fund, New Development Bank ("BRICS Bank") — have together accounted for merely $8 billion of this.
It has all been national credit issued by China’s major institutions of that purpose: Exim Bank, China Development Bank, China state banks. And that — though Wharton doesn’t discuss this as such — on top of many trillions of dollars-equivalent in national credit issued to grow China’s economy since the financial crash, and to drive growth in other parts of the world and in years prior to the Belt and Road Initiative.
China is virtually the only nation in the world following this national credit policy over the period of trans-Atlantic collapse; the only nation doing so on such a scale; and of course, this is supposed to violate the monetarist rules of economy set out by those institutions "studying it." Thus the constant cries that the "China debt bubble" must collapse, and/or will collapse the entire world economy.
Yet China is, in fact, deleveraging debt and writing off non-performing debt at the same time, particularly with negative amounts of liquidity going into its shadow banking sectors during 2016 and 2017 so far. Having started with the Glass-Steagall principle of separated-lending banks having almost no exposure to securitization and derivatives markets, it is able to combine extraordinary credit issuance, extraordinary leaps in productivity in its infrastructure and major industrial sectors, very rapid employment growth, and bad debt write-off. The country has also lifted another 55 million rural poor out of poverty from 2012-2016.
Not that monetarist economists will believe this is possible.