[Why Times 정세분석 2084] 30년만에 다시 떠오른 中‘삼각부채’, 위기의 끝은 어디인가? (2023.5.16)

Ah, China, the land of the Great Wall, legendary dragons, and a booming economy that once seemed unstoppable. But, my friends, as the saying goes, even dragons have their weak scales. Today, we dive into the depths of China's economic conundrum, a puzzle that has the world buzzing with curiosity and concern.

The Resurrection of the Debt Triangle 🐉

Picture this: a dragon coiled in financial turmoil, its fiery breath dampened by dwindling domestic demand and sluggish growth. What's causing this dragon to stumble? None other than the infamous "Debt Triangle" – a beast that haunted China's economy three decades ago, has reemerged from the shadows.

The Debt Triangle emerges when delayed or partial payments among companies result in a web of interlocking debts, straining production, and investments. These financial quagmires, when left unchecked, can spawn bad loans and exacerbate financial risks.

The 1990s saw the birth of this monster due to monetary tightening efforts to curb inflation. To tame this beast, Premier Zhu Rongji unleashed a bold move, injecting a colossal 50 billion yuan (roughly 5 trillion Korean won) into resolving the crisis.

Fast forward to today, and the Dragon's heart, which pumps 60% of China's GDP, lies in the hands of private enterprises. They're grappling with delayed payments and a lackluster domestic economy, prompting the mighty Politburo to pledge to root out this debt problem. But can they pull it off?

The Looming Crisis 🐲

Bloomberg, that ever-watchful sentinel of economic trends, sounded the alarm: China's economic recovery is showing signs of fatigue. We must read the upcoming economic data releases from Chinese authorities with a keen eye.

Why, you ask? Because in the world of Chinese statistics, appearances can be deceiving. China's GDP growth may seem stellar, but comparing it directly to last year's figures can be a distortion. Instead, we should focus on month-to-month data to get a clearer picture.

For instance, while industrial production may appear to have surged by 10.8% when compared to the same period last year, a closer look reveals a 1.3% contraction when compared to the previous month. Smoke and mirrors, my friends.

The Triangle Tightens Its Grip 🐉

The heart of this crisis lies in the declining profitability of private companies, diminishing foreign trade, and a shrinking market for small and medium-sized enterprises. With supply chains disrupted, overseas demand waning, and liquidity drying up, the Debt Triangle's jaws are closing in.

A recent survey of 108 small and medium-sized businesses by Guangdong's Small and Medium Enterprise Development and Promotion Bureau paints a grim picture. Over 83% of these companies faced difficulties in receiving payments in the final quarter of last year.

Furthermore, 43.44% anticipated longer accounts receivable periods in the first quarter of this year compared to the previous year. Money woes are spreading like wildfire, even among well-established companies, widening the scope of the Debt Triangle crisis.

The Dragon's Burden 🐲

Let's not forget that China's economic resilience is a testimony to its history. It has weathered storms, resurrected from ashes, and emerged stronger each time. But the Debt Triangle is a formidable adversary, and the battle to defeat it won't be easy.

Wang Dongjin, a member of China's top legislative body, has hinted at a two-tiered debt scenario. Local governments, banks, and enterprises are entangled in a web of financial obligations. If a company goes bankrupt, it could lead to mass layoffs and increase risks for banks, highlighting the urgency of addressing private enterprise debt first.

The stakes are high, my friends. If companies don't receive payments for their goods and services, liquidity problems will escalate, potentially turning this economic slowdown into a full-blown crisis.

Conclusion 🌟

In the dragon's lair, caution is our shield, and skepticism our sword. As China grapples with the reawakened Debt Triangle, the world watches with bated breath. Can this mighty dragon once again conquer its financial demons, or will it be ensnared in the intricate web of debt?

In the realm of economics, as in ancient legends, nothing is certain. But one thing is for sure: the world will be watching, waiting, and hoping for China to emerge from this challenge stronger and wiser than ever before. The dragon's tale is far from over, and the chapters ahead promise intrigue, drama, and perhaps even a triumphant finale.