Why China is a Ponzi scheme - Victor Shih

Victor Shih

Calculating China's debt has been a major political game, and political analyst Victor Shih claims the country's debt "around 328% of GDP in May", writes Livemint. The central bank overcalculated banking assets, he says.

Livemint:

Prof. Victor Shih at the University of California at San Diego thinks that the PBoC estimates of banking system assets are overstated because there could be double-counting. He has come up with his own calculations in a new brief for the Mercator Institute for China Studies in Germany (Merics’ China Monitor: “Financial Instability In China: Possible Pathways And Their Likelihood”, 20 October). According to him, overall credit to the non-financial sector (including households, Central and local governments) from banking and non-banking channels (including shadow-banking channels) was around 328% of GDP in May. For comparison, the Bank for International Settlements puts this number at 257.8% as of March. Given this huge debt burden, China’s interest payments are rising much faster than its nominal GDP. He notes tersely, “China as a whole is a Ponzi unit.” That does not leave much room for doubt.

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