Dear Changyi He,
Thank you for your thoughts on this subject and I deeply apologize for responding to your defense of President Xi Jinping and his impeccable economic record.
To be sure, governing a territory as vast as China is no mean feat and certainly when there’s a saying,
“Heaven is high and the emperor far away.”
For the sake of China and the Chinese economy, I would certainly hope that President Xi has managed to clean out the shadow banking industry in China. To that end, greater transparency ought to be encouraged to highlight the achievements of the President in the face of great adversity.
When it comes to real interest rates, that China has positive real interest rates is perhaps testimony to the resilience of the Chinese economy but that the United States, Europe and Japan are able to maintain negative real interest rates is testament to the global perception of the value of such debt as a safe haven.
China’s sovereign debt levels are certainly far higher than before — but this may be more a function of greater transparency from Beijing rather than any specific economic discovery of such heightened debt loading.
Be that as it may, as you rightly point out, the dangers presented from shadow banking have somewhat diminished but have not evaporated altogether.
That China has thus far been able to hold its own against a U.S.-initiated trade war is perhaps also testimony to the resilience of the Chinese economy.
Yours,
Patrick
