from Armstrong Economics:
The Fitch downgrade of China’s credit rating is interesting because it is ANTICIPATING that China will have to bailout the state and local governments as well as banks. Under this approach, Europe should be downgraded to JUNK status.
Fitch downgraded China’s sovereign credit rating for the first time since 1999 because of concerns that the country’s rising debt problems will require a government bailout. The downgrade was from AA- to A+, citing a number of “underlying structural weaknesses” within the Chinese economy primarily focusing upon the rapid expansion of credit. What they are actually doing is trying to predict the next economic recession. They are a few years ahead of schedule. That will be 2016.
Fitch has warned about the rise of shadow banking, and said that total credit in China may have reached 198% of gross domestic product by the end of last year, up from 125% in 2008. It is true, that since 2009 state-owned banks poured into the economy loans to power it through the global financial crisis.
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