Struggling to keep its economy growing, the city of Ruzhou spent big, but is now asking its health care workers for cash to stay afloat.
Great piece. The problem isn't incompetent officials: the problem is unrealistically high GDP growth targets that clearly cannot be met except by borrowing and overbuilding (and, of course, capitalizing investment losses that should be expensed).https://t.co/cWAJ8ANqsG— Michael Pettis (@michaelxpettis) November 11, 2019
Begging Nurses for Money
The New York Times asks How Bad Is China’s Debt?
Ruzhou, a city of one million people in central China, urgently needed a new hospital, their bosses said. To pay for it, the administrators were asking health care workers for loans. If employees didn’t have the money, they were pointed to banks where they could borrow it and then turn it over to the hospital.
Ruzhou is a city with a borrowing problem — and an emblem of the trillions of dollars in debt threatening the Chinese economy.
Local governments borrowed for years to create jobs and keep factories humming. Now China’s economy is slowing to its weakest pace in nearly three decades, but Beijing has kept the lending spigots tight to quell its debt problems. Increasingly these deals are going sour, as they did in Ruzhou, and the loans are going unpaid. Lenders have accused three of Ruzhou’s hospitals and three investment funds tied to the city of not paying back their debts.
Local officials have long used big spending to keep the economy growing. Ruzhou is home to a number of white-elephant projects, including a stadium and sports complex turned e-commerce center, now largely unused. A shantytown redevelopment project, begun four years ago to give rural residents new homes, has been slowed for lack of money, locals said.
Doctors and nurses at the traditional Chinese medicine hospital complained to one local state-owned newspaper that they were being ordered to give between $14,000 and $28,000. At Ruzhou Maternal and Child Health Hospital, nurses and doctors were told they had to invest between $8,500 and $14,000, according to government online forums and state media.
Ruzhou officials did not respond to repeated requests for comment. Two employees of The New York Times who traveled to the city were briefly held by the police and forced to leave.
Tip of the Iceberg
Ruzhou has several hospitals in trouble, an unused sports stadium, a cultural complex in shambles, and a failed shantytown project.
Play this same scene throughout China.
Nobody is quite sure how big the problem might be. Beijing says the total is about $2.5 trillion. Vincent Zhu, an analyst at Rhodium Group, a research firm, puts the figure at more than $8 trillion.
Factor in the world's worst air pollution and water supplies you would have to be crazy to drink from.
Yet, US hyperinflationists think the dollar will collapse to nothing, Chinese debt somehow doesn't matter, China will soon rule the world, and the yuan will displace the dollar as the world's reserve currency.
I suggest Forget the Yuan: King Dollar is Here to Stay for quite some time.
The yuan is not even close to competing with the dollar for at least six reasons.
Meanwhile, Chinese growth is hugely overstated and its massive debt problem little understood.