Monday, March 15, 2010

Citigroup (NYSE:C) Right on China Debt

Citigroup on China Debt and Risk

Citigroup (NYSE:C) was right when it warned China could have some major problems based on local government debt issues in the country. Seeming to confirm that, China Premier Wen Jiabao said China faces some challenges in that regard of its own, but the global economy also faces major problems going forward, with double dip recession very possible.

Of particular concern to Wen was the export market, which remains down, as consumers (especially Americans), hold back on spending, causing demand for products to continue to falter.

Other things that could dramatically impact the markets could be ongoing instability in the exchange rates, along with continuing sovereign debt problems in Europe, which while temporarily relaxed because of commitment by the European Union to back Greece if its efforts don't pan out, still are there with more important countries like Portugal, Ireland, Italy and Spain, which if any were to fall would be much more damaging than the fall of Greece; as far as the EU being able to save them goes.

For China, there are also issues of the extraordinary debt they now have as the consequences of their stimulus program, which Citigroup estimates could result in up to $350 billion in bad loans in the years ahead.

No comments: