China’s public sector debt needs to be dealt with “immediately”, according to former Treasury minister Lord Sassoon

Lord Sassoon: China needs to resolve its debt

China’s public sector debt needs to be dealt with “immediately”, according to former Treasury minister Lord Sassoon

By Olivia Goldhill

2:03PM GMT 12 Mar 2014

China’s debt issues are the country’s biggest economic concern and need to be tackled, former Treasury minister and chairman of the China-Britain Business Council Lord Sassoon has said.

Lord Sassoon, a former Treasury mandarin as well as Commercial Secretary to the Treasury from 2010 to 2013, told The Telegraph that Chinese debt is a more pressing worry than the recent mixed figures concerning the country’s economic growth rate.

“I think the biggest question I would have, and China itself has in the short term, is the debt issues which they need to resolve.

“If there’s something to focus on, it’s around banking, shadow banking, provincial debt and I don’t know where that will all land”, he said.

Last year, China’s local government debt surged to nearly £1.8trn, 67pc higher than in 2010.

The rise bought China’s total public debt, including money owed by central government, to 58pc of its £5.11trn economy.

Meanwhile, China’s banks have overseen a rapid expansion of lending that has seen £9.1trn of credit created, and figures released in February showed that under-performing loans made by Chinese banks have risen to the highest level since the financial crisis.

China’s debt overhang has raised concerns about a credit crisis and slowdown of China’s economy.

Recent economic figures have shown a decline in manufacturing PMI and exports, but Lord Sassoon said he’s more focused on long-term developments.

“I think people can get excessively excited about China’s short term numbers, which have been mixed in recent months.

“For me, it’s not so much one month’s, one quarter’s trade figures”, he said.

He went on to say that he believes the Chinese government are prepared and able to tackle the problems, however.

“The new Chinese leadership recognise they’ve got a big problem they need to deal with immediately around the overhang of the public sector, particularly provincial, debt.

“I think there’s a lot of issues for the Chinese government to work on but they’re not hiding them and they’ve got very good people on the case”, he said.

Lord Sassoon said the Asian super-power’s banks were also prepared to address their own issues.

“If you go and talk to the big state-owned banks, the four big Chinese banks are very open and interesting on the subject of loans to sectors where there’s been over-capacity and there are businesses that have failed or failing.

“I happen to believe there will be a soft landing because it’s the quality of the people in Beijing who are managing these issues”, he concluded.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: