Government Debt

China’s stimulus priorities are plain to see

14 Nov 2024

Readouts of Beijing’s economic meetings focus on fixing local government debt and reflating asset prices, both for equities and property. Expect ongoing policies to zero in on these areas. Those waiting for heavy spending and consumer handouts will be disappointed.

George Soros’ 1980s US debt warning echoes today

8 Nov 2024

The hedgie said in 1986 that booming stocks belied shaky government finances. That’s true now, and not just in the United States. Britain and France are also battling a fiscal trilemma, where states can’t simultaneously have high spending, low taxes and financial stability.

China consumer is epitome of delayed gratification

4 Nov 2024

Beijing says it wants to boost consumption’s 53% share of GDP as investment-led growth fades. Yet central planning is hard to square with free-spirited spending. Rebalancing without a period of stagnation is not easy. Recent policies also suggest the old model is hard to ditch.

Value push will mostly survive Japan election mess

29 Oct 2024

A decade-long effort to boost shareholder returns can continue to gain traction despite the LDP's disaster at the polls. It helps that Japan Exchange took charge of the party's initiative for structural reform. For now, as politicians vie for power, a weak yen will buoy stocks.

Debt rule tweak can help UK avoid moron premium

25 Oct 2024

Two years ago, former Prime Minister Liz Truss’ unfunded tax cuts sent 10-year gilt yields surging to 4.5%. Now, new Chancellor Rachel Reeves can avoid a similar debacle with small changes to the fiscal rules in next week’s Budget. With yields at 4.2%, there is no room for error.

UK budget is a tightrope walk over a black hole

24 Oct 2024

Finance Minister Rachel Reeves is due to set out tax and spending pledges while hemmed in by campaign promises and economic reality - even if debt rules are tweaked. In this Viewsroom podcast, Breakingviews columnists discuss the tall task of selling it to the public and markets.

China pins stimulus on money merry-go-round

23 Oct 2024

Beijing plans to swap some of its $9 trln of local government debt into bonds with full, rather than implicit, state backing. The rejig will lower rates of interest, lengthen maturities and allow provinces to issue more debt to banks. That will juice spending for a while.

Italy has more to gain from France’s pain

14 Oct 2024

Rome borrowing costs are converging with Paris. Prime Minister Giorgia Meloni’s stable government is pledging to contain its deficit and pushing through reforms, at a time when its peer is in turmoil. To press home the advantage, though, Meloni will need to take bolder action.

China stimulus aims at its greatest wall of debt

14 Oct 2024

The finance ministry pledged to tackle local government borrowings. It reveals an intent to smash systemic financial risk and, by not rushing to support consumer demand, a desire to avoid repeating past spending mistakes. Beijing's plan is welcome but still missing key details.

French PM has a plan but lacks time to fix budget

4 Oct 2024

Michel Barnier is proposing 30 billion euros of spending cuts and tax hikes to shrink the country’s deficit. Even if a divided parliament approves, he will have to repeat the feat in future years to fill the fiscal hole. This government’s weak hold on power makes that unlikely.

Greece is unlikely victor in bank selldown race

3 Oct 2024

Athens sold 10% of National Bank, effectively ending the privatisation of the major lenders it rescued. Germany, the Netherlands, the UK and Ireland still own bank stakes. Greeks can thank continued government support and a strong economy, fuelled by rising investment.

Beijing directs fiscal firepower at itself

27 Sep 2024

The government may sell $284 bln of special bonds. Part of that will be to boost consumption while a huge chunk will probably support indebted local provinces and state banks. That'll help GDP hit the official target this year but won't do much to alter the longer-term picture.

Beijing’s $114 bln stock market bet rings hollow

25 Sep 2024

The central bank is hoping to jump-start a lasting stock market recovery by funding investments and share buybacks. But without a way to deal with underlying lacklustre growth, such schemes are likely to provide a short-term boost that soon fizzles out.

China’s big ball of money has nowhere else to go

23 Aug 2024

Beijing's warnings slowed a rush into government debt sparked by moribund stocks and falling home prices. With US rates set to fall, investing more abroad would be an option if it weren't for capital controls. Unless they're relaxed, the bond-buying frenzy is likely to restart.

India wants to be China’s gateway to the West

26 Jul 2024

Rather than integrate into its neighbour’s supply chain, the South Asian country wants to court Chinese investment. Its annual economic survey lays out a way for firms from Shein to BYD to keep selling in Western markets. A lot rides on how the Sino-American trade war plays out.

Modern capitalism’s problem is too much prosperity

19 Jul 2024

Growth in productivity worldwide has collapsed since the 1970s. One explanation is that modern life in developed countries has become too comfortable as governments cushion the effects of economic cycles. Reviving capitalist economies may require accepting some level of hardship.

UK gilts are ready to regain their long-lost shine

12 Jul 2024

British government bond prices are off 24% in three years due to a budget crisis, tight monetary policy and political turmoil. Yet the UK now has a fiscally austere new administration with a big majority and a central bank ready to cut borrowing costs. That could stop the rot.

Victorian rail mania has lessons for AI investors

12 Jul 2024

Excitement over artificial intelligence has spurred a wave of investment. In the mid-1840s, British speculators similarly went wild for another capital-intensive technology: railways. The historic boom and subsequent bust provide a salutary warning for today’s hyped-up markets.

Markets will keep shaky French regime on a leash

11 Jul 2024

A left-wing coalition and Emmanuel Macron’s centrists are vying for control of France’s government. Fiscal discipline may fall by the wayside. Paris is already being disciplined by Brussels for its high deficit and debt. A reliance on foreign investors leaves little wiggle room.

Le Pen will fail as star of Meloni in Paris

3 Jul 2024

Markets are relatively calm about the prospect of a far-right government after Sunday’s second electoral round. They may believe that Marine Le Pen’s party would mimic the apparent moderation of Italy’s Giorgia Meloni. Her fiscal plans, inexperience and beliefs suggest otherwise.