China has a dangerous dollar debt addiction

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By Christopher Balding
Bloomberg News
Saturday, January 5, 2019

China's foreign debt has been rising rapidly, and that's becoming an increasingly big problem -- for the country and, potentially, the world.

Officially, China lists its outstanding external debt at $1.9 trillion. For a $13 trillion economy, that's not a major amount. But focusing on the headline number significantly understates the underlying risks.

Short-term debt accounted for 62 percent of the total as of September, according to official data, meaning that $1.2 trillion will have to be rolled over this year. Just as worrying is the speed of increase: Total external debt has increased 14 percent in the past year and 35 percent since the beginning of 2017.

... Dispatch continues below ...



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External debt is no longer a trivial slice of China's foreign-exchange reserves, which stood at just over $3 trillion at the end of November, little changed from two years earlier. Short-term foreign debt increased to 39 percent of reserves in September, from 26 percent in March 2016.

The true picture may be more precarious. China's external debt was estimated at between $3 trillion and $3.5 trillion by Daiwa Capital Markets in an August report. In other words, total foreign liabilities could be understated by as much as $1.5 trillion after accounting for borrowing in financial centers such as Hong Kong, New York and the Caribbean islands that isn't included in the official tally.

Circumstances aren't moving in China's favor. ...

... For the remainder of the report:

https://www.bloomberg.com/opinion/articles/2019-01-06/china-s-dollar-deb...

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