China's Real Debt Situation

07-28-2009 • Washington;s Blog

As I have repeatedly pointed out, China is in better shape than the U.S. and many other Western countries, but all is not rosy in China. CNN Money is now making some of these same points out for a mass audience: But when Chinese leaders meet their U.S. counterparts this week, they should pause for reflection before venting any criticism, because hidden liabilities mean China's books are uglier -- potentially much uglier -- than at first sight. Indeed, Ellen Brown argues that China has not outsourced its money-creating power to private banks because the government and private banks are really one and the same. Therefore, while China's debt might be higher than previously disclosed, the government does not have to pay huge amounts of interest to a third-party creditor - unlike the U.S. - thus putting China at an economic and competitive advantage.