China needs to prepare for zero interest rates – Global Times

According to an opinion piece published by the highly-influential Chinese news outlet, The Global Times, China is seemingly approaching a zero rates monetary condition, in the face of growing demands for liquidity, foreign capital and the real economy continues to slow down.

 Key Quotes:

“Mounting debts and the financing problems in the real economy will promote China to a zero rate condition. In the first half of 2019, China’s overall debts accounted for 306 percent of the GDP, up 2 percentage points from the 304 percent in the first quarter, according to a report from the Institute of International Finance (IIF). The number was just around 200 percent in 2009 and 130 percent in 1999.  

According to data from the National Institution for Finance and Development, China’s enterprise sector’s debts account for 155.7 percent of the nominal GDP, up 2.2 percentage points from the end of last year.

It’s far beyond the government sector’s leverage ratio of 38.5 percent and the resident sector’s leverage ratio of 55.3 percent.

In the enterprise sector, private companies embattled with financing problems account for 30 percent.”

The above article is just an editorial and therefore, has virtually no impact on the market. The market sentiment remains lifted amid trade optimism and the Hong Kong election’s outcome.