To ensure the total placement of the 1,400 billion in securities issued on the market, an operation on which the hopes of stronger growth depend, the Dragon is asking for help from major foreign finance
14/11/2024
Eventually it will take some of the West to help China make ends meet on its debt. Beijing, on several occasions, has placed around 1,400 billion dollars in government bonds on the market, with which to raise liquidity to try to give its economy an acceleration that has not been seen until now. And now, perhaps, even more urgent given the warnings coming from the main international investment banks which, smelling the smell of the new American protectionism coinciding with the Trump-bis administration, promptly cut the Dragon’s growth forecasts.
Problem, the market may not respond as it should. The Chinese banks, those under state control and therefore in the hands of the party, so to speak, have done their part, gorging themselves on sovereign bonds and at the same time exposing themselves to the risks of their devaluation, with consequent losses on the balance sheet. But perhaps it’s not enough, we need to throw the classic heart over the equally classic obstacle. So here came the team order from Beijing: to try to involve the large foreign financial and commercial institutions to place some more Chinese debt.
And so, the market regulatory authorities and the supervisory authorities themselves decided overnight to intensify meetings with foreign banks to get their opinion on the country’s efforts to support growth and also obtain support in the allocation of titles. In particular, the request received from Beijing is to receive a sort of guide on how to place Chinese debt on non-Chinese markets, in short increasing the appetite of foreign investors.
On the other hand, China faces a difficult balancing act in trying to convince Western markets that its policies will be successful, without taking further action to directly stimulate domestic demand and therefore growth. It is not clear what the banks surveyed and questioned responded to, but one thing is certain. Beijing cannot afford to fail and lose the debt game, because it has bet on the growth that the market demands.
And therefore, without help from outside, it will be very difficult for China to achieve its GDP objectives, because less money will arrive than has been sold. In reality, some support has already arrived: last year, for example, Egypt resorted to the so-called Panda bonds, issuing bonds in Chinese currency on its market. And he is ready to repeat the operation, thanks to the support offered by the Asian Investment Bank. But maybe that’s not enough.
