China’s Secret Source For Funding Infrastructure


Dandelion Salad has the article China’s Secret Source For Funding Infrastructure by Ellen Brown.

China’s central bank, the People’s Bank of China, issues money for infrastructure in an even more direct way. It has turned to an innovative form of quantitative easing in which liquidity is directed not at propping up the biggest banks but at “surgical strikes” into the most productive sectors of the economy.

Those of us who understand Modern Money Theory (MMT) can see that what China seems to be doing is applying MMT in their system. I could never understand why some MMT experts outside China harp on China’s debt problem. China’s situation sounds exactly like our Federal deficits that are not a problem at all to the USA according to these same MMT experts.

In a December 2017 article in the Financial Times called “Stop Worrying about Chinese Debt, a Crisis Is Not Brewing”, Zhao expanded on these concepts, writing:

“[S]o-called credit risk in China is, in fact, sovereign risk. The Chinese government often relies on bank credit to finance government stimulus programmes…. China’s sovereign risk is extremely low. Importantly, the balance sheets of the Chinese state-owned banks, the government and the People’s Bank of China are all interconnected. Under these circumstances, a debt crisis in China is almost impossible.”

This last excerpt seems to confirm to me that all the worries about China’s debt level being too high is nonsense from MMT experts who ought to know better.

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