Chinas Great Wall of Debt

China’s Great Wall of Debt

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The Wall Street Journal had a fascinating article a few days ago about the increase in construction projects that are struggling to pay back investors on any of their ambitious projects across rural China. The article, “There’s No Money Right Now”, shows a stark picture of an unfinished outdoor stadium in Sandu. The county of 400,000 people has a goal by 2020 to eliminate poverty, which is defined by the government as living on less than 95 cents a day. The ability to pay interest, let alone any return of principal is very unlikely. The root of the problem in China is easy off-balance-sheet borrowing by local governments offered to individual investors by independent brokers and wealth advisors.

There are many parallels to the unprecedented borrowing in the US in late 2008/2009. If you read through the comments in the referenced WSJ article, you will find someone comparing the   empty arenas to Las Vegas and California in 2009. Does your company have any projects in China? Are you seeing any financing or payment troubles related to your projects at home or abroad?

We have blogged recently about the economic forecasts for Georgia and the overall U.S. economy, and most of the reports we have focused on see steady interest rates and continued robust construction permits and financing throughout 2019. Applied Software has multiple Autodesk and SaaS solutions to help your firm become more productive and meet your tight time frames. Let us know how we can help with any of these solutions or consulting options that can empower you and your team to build a great 2019.

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