“Gray rhinos,” is a buzzword people are using to talk about China’s recent economic challenges. They refer to obvious dangers that are often ignored until it’s too late.
CGTN’s Wang Guan explains.
For example in real estate, one gauge of affordability is to compare housing price against personal income. In big Chinese cities that ratio is above 10. In the US Only 4. So last year Beijing tightened loans and increased down payment requirements.
This year home prices in Beijing, along with other major cities, fell for the first time in nearly three years.
Another “gray rhino” is debt owed by Chinese companies. In 2011, total credit given to these firms was 120 percent of economic output. Now 166 percent.
The Chinese regulators went after these big state owned firms, ordering state banks not to make easy lendings to them and limited these firms’ overseas expansion.
Last but not least local government debt. Due to a stimulus package in 2009, local government debt more than TRIPLED to $2.67 trillion in 2013.
To rein in that “gray rhino”, Beijing says it no longer uses GDP data as the benchmark for evaluating and promoting local officials. So local politicians would have less incentive, as they once did, to borrow massive loans to build infrastructure and make the economy look good on paper.
Michele Wucker discusses how the “gray rhino” threat could impact China’s economy
For more on what “Gray Rhinos” are and how they could affect China’s economy, Rachelle Akuffo spoke to the person who coined the term itself, Michele Wucker. She is the author of “The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore,” and founder of strategic advisory firm, Gray Rhino & Company.