The word "D." it is not a prerogative of the Mediterranean countries. It is not talked about as loudly as in Europe and the tones are not as alarmist, but even in the Far East there are financial instability worthy of attention. So much so that, according to Chinese sources reported by Reuters, the Beijing government has a debt repayment plan of 400 billion dollars, slightly less than the sum allocated by the EU through the bailout fund, the EFSF.
The news might seem surprising, considering that China is the largest creditor of the US and for years has had a savings glut with the rest of the world. Yet, if the central government is in excellent financial health, so are not the Chinese local authorities, crushed by debts of 10 trillion yuan (about 1.500 billion dollars).
The stimulus package developed in 2008 in response to the crisis led to a boom in rather opaque financial vehicles that have served regions and municipalities to circumvent national credit restrictions. Beijing wants to create ad hoc companies that absorb toxic securities worth 400 billion. Objective: to free local authorities from the spiral of debt and allow the Central Bank to raise interest rates without collapsing the economy in a series of bankruptcies. The plan would envisage that the central government and the state banks would bear part of the losses deriving from the cancellation of the debt. The 'Big Four' are also involved: Industrial and Commercial Bank of China, Bank of China, China Construction Bank and Agricultural Bank of China.
Confirming that China's public finances may be in trouble over regional debt, Fitch revised its outlook for the yuan from stable to negative last month. Furthermore, according to Standard & Poor's, the percentage of non-performing loans of Chinese banks could reach 5-10% in the next three years.
