Parallel Tracks

The WSJ's Tom Orlik makes a much better informed presentation of a point I have occassionally made elsewhere from time to time, concerning the opaque nature of China's economy and banking system:

"But the official Chinese debt tally doesn't include debt owed by a number of large state-owned entities, local governments and even a central government ministry... Adding up the official debt data from these other parts of the government as well as from state banks and estimated debt of asset-management companies puts China's total government liabilities at $3.55 trillion, equivalent to 59% of GDP... Stephen Green, China economist at Standard Chartered Bank, estimates total debt, including contingent liabilities, at 77% of GDP."

Compare with Orlik's remarks on the U.S. debt straits:

"The gross debt of the U.S. federal government was $13.53 trillion, or 93% of GDP... The figures don't include the liabilities of the government to pay retirement and health benefits in the future nor the debts of Fannie Mae and Freddie Mac, the mortgage companies that have been nationalized, nor the debts of state and local governments."

The possible consequences of either of these two giant States becoming insolvent is not something ordinary people on either side of the Pacific would want to contemplate - the scale of this debt is unprecedented and unsustainable.