Why did a Chinese economist slam Ray Dalio's assessment of debt situations in US, China?
Xu Gao, chief economist at Bank of China International (China), said in a recent 9,000-word article that Dalio was mistaken in calling for China to deleverage, arguing that such a view 'misjudges' the country's debt dynamics.
'China's recent debt-rollover issues were not caused by excessive borrowing, but by overly harsh deleveraging policies that disrupted liquidity,' Xu wrote in the article titled 'Where Did Dalio Go Wrong on National Debt?'
'Rather than doubling down on deleveraging, we need to correct the mindset behind it, which has already weighed heavily on the macro economy,' Xu said.
His comments, posted to social media on Thursday, came as economists and policy circles have been discussing whether more stimulus is needed in the second half of the year to shore up China's economy amid external uncertainties, a prolonged property downturn, and persistent deflationary pressures. Attention is now turning to an upcoming Politburo meeting that is expected to
set the policy tone for the second half.
In the US, worries over the sustainability of US government debt have intensified following the passage of the
'Big Beautiful Bill' , which raised the debt ceiling by US$5 trillion and prompted warnings of a looming 'debt bomb' from figures such as Elon Musk and Dalio.
Dalio, the billionaire investor and founder of one of the world's largest hedge funds, has long advocated for a 'beautiful deleveraging' strategy in China to address its debt challenges.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
South China Morning Post
33 minutes ago
- South China Morning Post
Chinese corporate earnings are likely to support ongoing run for stocks: analysts
The earnings season that is under way is likely to spur a solid run for Chinese stocks , as a sunnier macroeconomic environment keeps profit growth afloat. With the frenzy surrounding US tariffs settling down and a dearth of new economic policies from Beijing, investors are turning their attention to corporate earnings reports to see if the rally still has legs. So far, analysts seem to believe the results have been positive. Second-quarter profits for mainland-listed companies likely increased 5.1 per cent from a year earlier, rising for a second consecutive quarter, according to Caitong Securities. Meanwhile, Huaitai Securities said it expected overseas-listed Chinese companies to post a collective 13 per cent profit increase in the first half, up from 8 per cent for all of 2024. Mainland-listed companies snapped a streak of 15 consecutive quarterly profit declines last year after Beijing ratcheted up policy support to bolster economic growth and the property market. A continued earnings recovery would instil more confidence among investors who are groping for fresh catalysts. Mainland stocks have rebounded significantly from their lows in April after Beijing and Washington struck a tentative trade deal and after that, China reported better-than-expected economic growth for the first half. 'China's credit cycle is picking up, and it's also actively pressing ahead with policies to boost consumption and combat [excessive industrial capacity],' said He Kang, an analyst at Huatai Securities in Shanghai. 'The improvement in corporate earnings may be sustainable.'
RTHK
13 hours ago
- RTHK
'HK and Macau to leverage collaborative strength'
'HK and Macau to leverage collaborative strength' John Lee led a delegation to Macau to meet his counterpart Sam Hou-fai. Photo courtesy of Information Services Department Chief Executive John Lee emphasised the crucial roles of the Hong Kong and Macau SARs within the Greater Bay Area during an official visit to Macau on Tuesday. Leading a high-level delegation, Lee met with Macau Chief Executive Sam Hou-fai. In a statement following the meeting, Lee said the two SARs will continue to harness their collaborative strengths across key sectors including the economy, cross-boundary infrastructure, tourism and culture. He said both Hong Kong and Macau are integral parts of the Greater Bay Area and will continue to promote its development. The Hong Kong delegation visited the Guangdong-Macau In-depth Cooperation Zone in Hengqin during the visit. Lee highlighted the strategic significance of the cooperation zone, describing it as a key initiative designed to enrich the practice of One Country, Two Systems, fostering Macau's long-term prosperity, stability and integration into national development plans. The delegation also toured a Chinese medicine centre there to learn about the integration of traditional Chinese medicine and the cultural tourism industry. The group also visited the Guangdong-Macau In-depth Cooperation Zone in Hengqin Planning Exhibition Hall that features more than 600 exhibits on new products and technologies. The Hong Kong delegation included Financial Secretary Paul Chan, Secretary for Constitutional and Mainland Affairs Erick Tsang, Secretary for Health Lo Chung-mau, Secretary for Transport and Logistics Mable Chan and director of the Chief Executive's Office Carol Yip. Lee and the officials returned to Hong Kong later in the day.
AllAfrica
15 hours ago
- AllAfrica
Vietnam should heed the risks of high-speed rail losses
As Vietnam embarks on building its first high-speed rail (HSR) system, the financial struggles and failures of similar projects worldwide offer important lessons and insights. While Vietnam has only recently moved toward implementation, many countries have operated advanced HSR systems for decades. The experiences of these early adopters provide a valuable roadmap of potential pitfalls to avoid. The financial unsustainability of high-speed rail is a global phenomenon. According to the OECD, most HSR projects worldwide operate at a loss. This is supported by a World Bank study of 258 transport infrastructure projects across 20 countries, which found that nine out of ten exceeded their initial budgets and 84% had inaccurate revenue forecasts. The study's author, Professor Bent Flyvbjerg, noted that a mere 0.5% of all projects were completed on time, within budget and delivered their anticipated benefits, often because governments rushed approval before conducting thorough feasibility studies. Even the most celebrated HSR systems are not immune. Japan's Shinkansen, the pioneer of high-speed rail, required the government to cover nearly 100% of its 380 billion yen construction cost (roughly US$17 billion today) and had lost around $100 million by 1972. Similarly, China operates the world's most extensive HSR network but faces mounting debt nearing $900 billion, with only 6% of its 45,000-kilometer network reportedly profitable. More recent projects highlight specific modern challenges. Indonesia's Jakarta–Bandung high-speed rail, a joint project with China, saw its budget balloon from $5.5 billion to $7.3 billion. Reliant on Chinese loans, the line was already reporting $200 million in annual losses upon opening in 2024. In Taiwan, a $15 billion HSR project launched in 2007 suffered continuous losses for years, with deficits reaching $1.73 billion by 2014. This was largely due to fierce competition from low-cost airlines and passenger volumes falling to nearly half of projections. These cases underscore the importance of cautious planning, realistic financial projections and a thorough assessment of long-term viability. Failure to account for these factors can lead to HSR projects becoming unsustainable financial burdens. Profitability and capital recovery time of global high-speed railway projects. Graphic: The Vietnamese / Luat Khoa Magazine Vietnam need not look abroad for cautionary tales; its own domestic urban rail projects have already suffered from the same issues plaguing HSR globally. Both the Cat Linh–Ha Dong line in Hanoi and Metro Line 1 in Ho Chi Minh City have been marred by severe cost overruns, prolonged delays and continue to operate at a loss. What is particularly concerning is that these are relatively modest urban projects, far less complex than the proposed North–South HSR system. The Cat Linh–Ha Dong line serves as a stark case study. Contracted to a Chinese builder, its budget ballooned from an initial $552.8 million to $886 million. The construction timeline stretched to nearly 10 years (2011–2021) for a railway that runs only 13 kilometers at a top speed of 80 km/h. Financially, the project is unsustainable. In 2024, it reported a post-tax profit of just $600,000—a mere 0.07% return on the original investment—and remains dependent on heavy government subsidies. Current estimates suggest a staggering 6:1 subsidy ratio, meaning for every $1 in ticket revenue, the government provides $6 in support. The financial unsustainability of the Cat Linh–Ha Dong project is apparent. Based on ticket revenue alone, the line would need 247 years to recover its $886 million investment. Factoring in its 2024 net profit of just $600,000, the payback period stretches to an astonishing 1,438 years. This calculation does not even account for its annual operating cost of over $24 million. Despite this sobering precedent, Vietnam is now undertaking its largest-ever public investment: the North–South High-Speed Railway. Approved by the 15th National Assembly in November 2024, with a budget of $67.34 billion for a 1,541-kilomater route, the project's projected cost has already increased by over $35 billion from its initial concept. To mitigate the immense financial risk, the government is shifting its strategy. A revised Law on Railways, along with new resolutions, now allows domestic enterprises to participate as primary investors. As experts like Associate Professor Tran Dinh Thien and Associate Professor Bui Quang Tuan argue, 'The mindset that only the state can build national infrastructure is outdated,' suggesting the project could catalyze the growth of Vietnamese industries. However, this new public-private approach is already facing public anxiety, particularly over the decision to allow VinSpeed—a recently established company with a charter capital of just $230 million—to register for the $67.34 billion project. VinSpeed, a key potential investor, has publicly stated it will 'accept potential losses' and is participating not for land but 'to serve the nation.' The company acknowledged that 98% of global high-speed rail projects are unprofitable but did not clarify whether these expected losses would be borne by its own capital or through state-supported loans, raising concerns about the project's financial transparency. This lack of clarity has been compounded by domestic media coverage that has largely focused on the project's potential, leaving little room for critical discussion of its risks. Procedurally, the project deviates sharply from international best practices. Core assessments for ridership, financial modeling and technology sourcing have yet to be finalized. Even more troubling is the timeline: the official feasibility study is not due until the fourth quarter of 2026, just months before the scheduled groundbreaking in December. This means companies are registering to invest in a multi-billion-dollar project before a formal feasibility report even exists. Financially, the project's costs are already an outlier. Prime Minister Pham Minh Chinh has explained that extensive use of elevated tracks and tunnels will push the estimated cost to around $43.6 million per kilometer—more than double the World Bank's global average of $17–21 million per kilometer. Despite all these unanswered questions, planning deficits and alarming cost projections, irreversible actions like land clearance and resident relocation are already underway in many provinces. Graphic: The Vietnamese / Luat Khoa Magazine The HSR era began in October 1964 with Japan's Tokaido Shinkansen, a project that laid the groundwork for a global wave of HSR development. Yet, in the decades since, only one project is widely regarded as a true financial success: the Train a Grande Vitesse (TGV) line connecting Paris and Lyon in France. Inaugurated in 1981, the Paris-Lyon TGV was built for a then-record low of just $4 million per kilometer for a total length of 417 kilometers, and was financed without direct government subsidies. This technical and commercial success was proven almost immediately. The line transported 10 million passengers in its first year, a number that quickly doubled, leading to an internal rate of return (IRR) of 12%—allowing the project to recover its initial investment in just 12 years. This success has endured to this day. By 2023, the TGV network carried 122 million passengers and generated 9.7 billion euros in revenue (approximately $11.3 billion), solidifying its status as one of the few HSR models in the world to achieve long-term commercial viability. This article was published in English by The Vietnamese and originally published in Vietnamese by Luat Khoa Magazine. It is republished here with kind permission.
