Wednesday, February 21, 2018
Business

IMF: China's economy is 'unsustainable' without major reform

China's economy, fueled by credit and government debt that has increased far faster than official statistics reflect, is heading in an "unsustainable" direction that poses major risks in the years ahead, the International Monetary Fund reported Wednesday.

In one of its sharpest critiques of the world's second-largest economy, the IMF characterized China as at a crossroads: nearing the limits of what it can gain from its reliance on consumer and industrial exports and in need of a dramatic round of restructuring to put more of the country's wealth into the hands of families and private businesses.

China's economic growth remains strong and is likely to remain near or above the 7.5 percent targeted by authorities. But the IMF noted growing risks in a heavily regulated financial sector that is showing signs of strain, including what the fund termed "large-scale regulatory arbitrage and moral hazard" as families and businesses try to subvert the low rates of interest the government allows banks to pay on deposits. That has given rise to an explosion in what the fund termed alternative "wealth management products" — marketed by banks to attract deposits but invested in "opaque" ways that seem reminiscent of the bundled mortgages that caused the U.S. financial crisis.

In one particularly telling statistic, the IMF said that total government debt in China may be as much as double that reflected in official data, once money borrowed by local officials is taken into account.

The fund estimated that combined debt at 45 percent of China's overall economy — compared with the official government debt of roughly 22 percent of gross domestic product. The figure has been growing rapidly in recent years as local officials borrowed heavily for infrastructure and other investments pursued to keep the economy afloat.

The fund said the figure is not in itself alarming because many of the investments are backed up by tangible assets or produce income, and China itself is flush with financial resources to cover any problem. But the rapid growth and the lack of transparency are a concern.

At 45 percent of GDP, the figure is low by developed world standards, where government debt has in many cases approached or exceeded 100 percent of the size of the national economy.

But the IMF's estimate comes at a time when China's economic model is appearing increasingly constrained, whether by external factors such as the fall in demand for its exports among slower-growing developed nations or by internal problems such as pollution, unproductive investments or the unwillingness of some in the ruling Communist Party to shift more income and financial power into private hands.

The new government has pledged to speed up such changes, particularly in deregulating the financial sector so that interest rates and lending decisions are made on the basis of market dynamics rather than dictated by government policy.

Comments
Career Q&A: Nut allergy is a serious workplace concern

Career Q&A: Nut allergy is a serious workplace concern

Q: My manager has recently started eating nuts at her desk, which is located right next to mine. Unfortunately, I have a serious nut allergy, so any contact with them could produce a life-threatening reaction. Even foods which contain tiny pieces of ...
Updated: 8 hours ago
Yes, we have some bananas: Port Tampa Bay welcomes first shipment in 21 years

Yes, we have some bananas: Port Tampa Bay welcomes first shipment in 21 years

TAMPA — More than two decades after the last bunch arrived on shore, bananas are back at Tampa’s port. More than 3,900 pallets of Chiquita bananas from Ecuador arrived last week at the new Port Logistics Refrigerated Services warehouse.It was the fir...
Updated: 11 hours ago
Guess co-founder steps aside after allegations from Kate Upton

Guess co-founder steps aside after allegations from Kate Upton

Associated PressNEW YORK — Guess Inc. says that co-founder Paul Marciano will give up his day-to-day responsibilities at the clothing company until a sexual misconduct investigation is completed. Model and actress Kate Upton told Time magazine earlie...
Published: 02/20/18
Grocery retailer Albertsons to buy drugstore chain Rite Aid

Grocery retailer Albertsons to buy drugstore chain Rite Aid

Associated PressThe privately held owner of Safeway, Vons and other grocery brands is plunging deeper into the pharmacy business with a deal to buy Rite Aid, the nation’s third-largest drugstore chain. Albertsons Companies is offering either a share ...
Published: 02/20/18
Following deaths from Irma, Florida looks to new rules for keeping nursing homes cool after outages

Following deaths from Irma, Florida looks to new rules for keeping nursing homes cool after outages

After national headlines and a public outcry over the deaths of 14 people at a Broward County nursing home after Hurricane Irma, nursing homes across the state are working to comply with new rules requiring them to have back-up power.But the process ...
Published: 02/20/18
Yoshi — car maintenance that comes to you — launches in Tampa Bay

Yoshi — car maintenance that comes to you — launches in Tampa Bay

A California-based company that promises to bring limited on-site car maintenance directly to you — from an oil change to a fill-up — has picked Tampa Bay as its next pit stop."Anything that your car needs, we’re going to bring to you," said Nick Ale...
Published: 02/20/18

Hernando Business Digest for Feb. 23

Business digestEventsCHAMBER RIBBON-CUTTINGS: The Greater Hernando County Chamber of Commerce will have two ribbon-cuttings in the coming week:• Access Health Care Physicians/Dr. Janice Rodriguez, 5290 Applegate Drive, Spring Hill, 10 a.m. Feb. 23. C...
Published: 02/20/18

Pasco Business Digest for Feb. 23

Business digestBrieflyLOCAL COMMUNITY RECOGNIZED: CHUY’S RESTAURANT TO OPEN: Chuy’s, the Austin-based Tex-Mex restaurant, will open its first Tampa Bay area location this spring near Cypress Creek Town Center in Wesley Chapel. The restaurant at 25750...
Published: 02/20/18
Steve Wozniak charms USF crowd: ‘The human or the technology — what’s more important?’

Steve Wozniak charms USF crowd: ‘The human or the technology — what’s more important?’

TAMPA — Steve Wozniak, the inventor of the Apple personal computer, is the tech genius who sounds less like an engineer, more like a philosopher.Startups? They can be a lot of fun — if started up for the right reason."The purpose should never be, thi...
Updated: 9 hours ago
Epilogue: Tourism community remembers Paradise founder Cedar Hames

Epilogue: Tourism community remembers Paradise founder Cedar Hames

When Cedar Hames spoke, you listened.He was a natural storyteller, always dressed sharp to match his wit and natural elegance. He grew a two-person business in St. Petersburg into a leading tourism, advertising and marketing agency over an esteemed 3...
Published: 02/19/18
Updated: 02/20/18