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"The West has still not understood how much China's rise had transformed the international financial system," said professor and economist Christoph Trebesch in Germany Spiegel in an interview following the publication of a new report on China's "hidden debt", co-author of Trebesch at the Kiel Institute for the Global Economy.
According to the report, the amount of foreign debt held by China is 50% larger than previously thought, making it the largest official creditor in the world. More than double the size of the International Monetary Fund and the World Bank combined, says L & # 39; economist.
The value of China's outgoing credit lines has gone from virtually zero in 2000 to more than $ 700 billion today, but China has concealed much of its debt by not reporting it to organizations such as China. as the IMF. The CEO of the Fund, Christine Lagarde, highlighted the lack of transparency of Chinese loans several times before.
Rating agencies such as Moody & # 39; s and Standard and Poor's are unaware of the debt, either because they simply follow sovereign debt issued by banks or bondholders, while most borrowing outside China are issued by the government itself.
Opponents of Chinese lending practices have long accused Beijing of engaging in debt diplomacy. Xi Jinping's famous Belt and Road Initiative (BRI) has often been criticized as an "economic colonialism" that risks trapping developing countries. Djibouti, for example, carries a Chinese debt equivalent to 70% of its GDP. The top 50 Chinese borrowers are worth more than 15% of their respective GDP.
The world has seen it in the 1970s, when US and European banks issued commodity-backed loans to emerging economies in Africa and Latin America. When the prices of these products fell, the savings became more indebted.
according to L & # 39; economist Many of the beneficiaries of new Chinese loans have also benefited from debt relief from their Western creditors after defaulting on their previous loans. China has also proposed restructuring plans and written off more than 140 of its foreign loans over the past decade, but on other occasions it has seized strategic badets as collateral, such as the Hambantota port in Sri Lanka.
As China seeks to limit the risk of its own domestic debt and offset the slowdown in its slowing economy, the country's foreign lending may be slowing down. Meanwhile, some debtors have already begun to defend against China's aggressive lending programs. But there is still a lot of sovereign debt issued by China waiting for maturity. Apparently, about 50% more than we think.
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Your regular columnist on Saturday, Clay Chandler, is in Aspen this week to prepare for The wealth Brainstorm Tech forum, which will begin Monday. Let me suggest to readers of Sino Saturday to consult our next Fortune The live event – the inaugural Fortune Global Sustainability Forum – will bring together world leaders from the lush Yunnan Province of China, from September 4 to 6, to discuss how businesses can achieve sustainable growth. See the agenda here, and sign up for a place here.
Eamon Barrett
Economy and trade
Domestic debt too. China is struggling with a hidden debt problem. It is estimated that provincial governments have twice as much debt as official documents show. This week, various Chinese economic regulators came together to develop new guidelines on how to deleverage regional governments. Their plan? Borrow more. Washington Post
Trade on the line. Trade talks resumed between Washington and Beijing, with both parties being connected by telephone this week. This was the first contact between the two sides since President Trump and President Xi announced a trade truce after the G20 meeting on June 29. However, a new face has joined the Chinese trade team: Trade Minister Zhong Shan, who is considered a hard party Party and fears to have a stricter position on trade. Bloomberg
Relations are still cold. A few days after the phone call, President Trump took the Twitter accuse China of "letting [the U.S.] down "by not buying enough farm produce." I hope they'll be starting soon! "Trump said on Twitter, but the Chinese side does not think that's going to happen. it is committed to buying more agricultural products. The hill
Sport shorts. Chinese sportswear brand Anta has denied the charges brought against it by short-seller Muddy Waters this week. In two two-day publications, Muddy Waters published a 106-page takedown report on Anta's business practices. Shares listed in Anta in Hong Kong fell more than 7% after the first publication on Monday. Trade has stabilized since then, but the company's share price has not fully recovered. Caixin
Innovation and technology
Chinese stars of technology. Shanghai's new Nasdaq-style STAR board was designed to convince for-profit technology companies to enter China instead of venturing into foreign markets. This week, nine of the top 25 STAR companies to feature on the new technology table announced their IPO price. Between them, the nine companies plan to raise $ 2.7 billion. TechNode
Reprieve or no reprieve? After Trump told Xi at the G20 he allow American companies to sell to Huawei, reports claimed that the Chinese telecommunications manufacturer had received a "stay", but that "stay" is not quite correct. According to statements by Secretary of Commerce Wilbur Ross, the situation has hardly changed. Huawei remains on the much-feared "list of entities" and US companies will need to apply for permission to enter into commercial relations with Huawei. These are the same conditions as before. The Wall Street Journal
Have a search. Public telecommunications manufacturer ZTE – the one that almost disappeared last year when Washington imposed sanctions against it – opened a cyber security center in Belgium, inviting external parties to review its source code and verify it Security. ZTE has similar centers in Italy and China. Caixin
Developers in development. Apple has opened its first developer and developer accelerator in China in Shanghai to help local developers create new applications. Cupertino operates a similar center in Bangalore, India, which it opened two years ago. At present, more than 2.5 million developers in Greater China are creating applications for the App Store, generating more than $ 29 billion in sales together. TechCrunch
In case you missed it
Economists blame China's "monstrous" turning point FT
Harbadment of Koch leader in China adds to visitors' fears NYT
How the US tech giants contribute to the establishment of the state of surveillance in China L & # 39; interception
US worries about China's investment, this time in Israel L & # 39; Atlantic
Politics and politics
The bill is dead. After weeks of demonstrations, Hong Kong leader Carrie Lam has declared "dead" a law proposal allowing extradition to Mainland China. However, protesters continue to ask Lam to formally withdraw the bill, which is currently suspended. The local legislator criticized the fact that Lam had flouted the extradition plan, but the senior Beijing official in Hong Kong said this week that the central government continued to support the warring leader. Morning of South China
Friends in arms. Despite strong objections from China, Taiwan President Tsai Ing-wen visited the United States this week, stopping in New York for two days to visit Taiwan's political allies in the Caribbean. . Tsai's escape to the United States, which comes a week after Washington approves $ 2 billion in arms sales to the Autonomous Island, is not an official visit. Tsai did the same thing in California last year. Morning of South China
This edition of CEO Daily was edited by Eamon Barrett. Find previous editions here, and sign up here for other Fortune newsletters.
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