First published: China Daily Europe, 6/03/2015
Economist sees a difficult transition, but thinks country will dodge bullet of financial crisis
Leading economist George Magnus believes China is set to face a severe fiscal squeeze. Fiscal revenues are set to grow at just 1 percent this year, the slowest growth since 1981, according to a Deutsche Bank report.
Such a fall in revenues could lead to China’s debt position – already 250 percent of GDP by some estimates – worsening.
“I think it is one of those difficult periods of transition that China is going through, principally because of the fallout and slowdown in real estate and also what is happening to land prices, which comprise about 25 to 30 percent of local government revenues,” he says.
Magnus, senior independent economist at the Swiss bank UBS, says the problem is compounded by the fact a new source of local government funding, the issuance of bonds, is unlikely to be up and running for up to a year….“more:”
