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China's Economy Is Running on Borrowed Money – and Time
It takes four dollars of debt to create a single dollar of GDP growth in China. For context, at the peak of the GFC in 2008 it was taking three dollars of debt to create a dollar of GDP growth in the U.S. China has received the kiss of debt, says Ruchir Sharma.
Ruchir Sharma is head of emerging markets and chief global strategist at Morgan Stanley Investment Management. A longtime columnist, he now contributes frequently to The Wall Street Journal, The Financial Times, Foreign Affairs and other publications. His first book, Breakout Nations, appeared in April 2012 and has since been credited for accurately foretelling the slowdown in the celebrated “BRIC” economies of Brazil, Russia, India and China. Ruchir’s next book, THE RISE AND FALL OF NATIONS: Forces of Change in the Post-Crisis World is now available. He lives in New York City.
Ruchir’s other interests include athletics and a serious commitment to running. Despite his extensive travels, he tries not to miss a single day of training no matter where he is in the world. He regularly trains with his former Olympics coach and competes in sprinting events. In 2011, he represented India in the World Masters Athletic championship in Sacramento. Ruchir also has a keen interest in wildlife and in international cinema and makes it a point to attend major film festivals anytime he can find a moment from his investing, writing and running.
What our research shows is that if you look back in history the single most important predictor of economic and financial trouble is when a country takes on too much debt over a short span of time. If a country does that it’s bound to make bad loans. It’s bound to make bad investment decisions because there’s no way that you can lend too much money and find enough credit worthy borrowers to make the right decisions with that money over a short span of time. So the exact way that we define this in the book is that if a nation takes on too much debt over a five-year time horizon the next five years typically tend to be very bad for a country. Now as far as China’s concerned there is no developing country in history which has taken on so much debt over such a short span of time as China as done in the after crisis era.
And so that’s why I remain so concerned about China which is that China’s debt is a share of its GDP keeps going up over time. And today it’s taking four dollars of debt to create a dollar of GDP growth in China. In the first quarter that number was as high as six to one. At the peak of the U.S. housing bubble in 2008 it was taking three dollars of debt to create a dollar of GDP growth in the United States. So that’s how addicted to debt China has become and why I remain so worried about China’s economic prospects going forward. So even though I was for much of my working life in all of China given how much China had achieved and how well it had done in many of the rules that I look at in the book from it’s consistent zeal for reforms, from the way that it’s leadership would keep changing and reenergizing itself every few years, from the way that it made use of its geography, from the fact that its demographics were quite favorable for many years and how it relied so much on a cheap currency to export its way to prosperity. But now my biggest concern is that like all economic miracles China is facing a point where the debt is so high that a miracle comes to an end.
In 2009, after the global financial crisis, China beat its 8% economic growth target while the West was economically gridlocked, caught up in debate in Washington D.C. The World Economic Forum that year marveled at the benefits that autocracies like China had over democracies in making executive decisions to protect and manage an economy. But it doesn’t look quite so marvelous from where we’re standing now, says Ruchir Sharma, the head of emerging markets and chief global strategist at Morgan Stanley Investment Management. China's post-recession strategy is the very moment the so-called miracle of its economy began to end. There is no developing country in history that has taken on so much debt in such a short span of time, which leads Sharma to think there is a rough road ahead for China, and that those hard times may form a global ripple. Ruchir Sharma's book is The Rise and Fall of Nations: Forces of Change in the Post-Crisis World.
Ruchir Sharma's book is The Rise and Fall of Nations: Forces of Change in the Post-Crisis World.
Sallie Krawcheck and Bob Kulhan will be talking money, jobs, and how the pandemic will disproportionally affect women's finances.
Health officials in China reported that a man was infected with bubonic plague, the infectious disease that caused the Black Death.
- The case was reported in the city of Bayannur, which has issued a level-three plague prevention warning.
- Modern antibiotics can effectively treat bubonic plague, which spreads mainly by fleas.
- Chinese health officials are also monitoring a newly discovered type of swine flu that has the potential to develop into a pandemic virus.
Bacteria under microscope
needpix.com<p>Today, bubonic plague can be treated effectively with antibiotics.</p><p style="margin-left: 20px;">"Unlike in the 14th century, we now have an understanding of how this disease is transmitted," Dr. Shanthi Kappagoda, an infectious disease physician at Stanford Health Care, told <a href="https://www.healthline.com/health-news/seriously-dont-worry-about-the-plague#Heres-how-the-plague-spreads" target="_blank">Healthline</a>. "We know how to prevent it — avoid handling sick or dead animals in areas where there is transmission. We are also able to treat patients who are infected with effective antibiotics, and can give antibiotics to people who may have been exposed to the bacteria [and] prevent them [from] getting sick."</p>
This plague patient is displaying a swollen, ruptured inguinal lymph node, or buboe.
Centers for Disease Control and Prevention<p>Still, hundreds of people develop bubonic plague every year. In the U.S., a handful of cases occur annually, particularly in New Mexico, Arizona and Colorado, <a href="https://www.cdc.gov/plague/faq/index.html" target="_blank">where habitats allow the bacteria to spread more easily among wild rodent populations</a>. But these cases are very rare, mainly because you need to be in close contact with rodents in order to get infected. And though plague can spread from human to human, this <a href="https://www.healthline.com/health-news/seriously-dont-worry-about-the-plague#Heres-how-the-plague-spreads" target="_blank">only occurs with pneumonic plague</a>, and transmission is also rare.</p>
A new swine flu in China<p>Last week, researchers in China also reported another public health concern: a new virus that has "all the essential hallmarks" of a pandemic virus.<br></p><p>In a paper published in the <a href="https://www.pnas.org/content/early/2020/06/23/1921186117" target="_blank">Proceedings of the National Academy of Sciences</a>, researchers say the virus was discovered in pigs in China, and it descended from the H1N1 virus, commonly called "swine flu." That virus was able to transmit from human to human, and it killed an estimated 151,700 to 575,400 people worldwide from 2009 to 2010, according to the Centers for Disease Control and Prevention.</p>There's no evidence showing that the new virus can spread from person to person. But the researchers did find that 10 percent of swine workers had been infected by the virus, called G4 reassortant EA H1N1. This level of infectivity raises concerns, because it "greatly enhances the opportunity for virus adaptation in humans and raises concerns for the possible generation of pandemic viruses," the researchers wrote.
The word "learning" opens up space for more people, places, and ideas.
- The terms 'education' and 'learning' are often used interchangeably, but there is a cultural connotation to the former that can be limiting. Education naturally links to schooling, which is only one form of learning.
- Gregg Behr, founder and co-chair of Remake Learning, believes that this small word shift opens up the possibilities in terms of how and where learning can happen. It also becomes a more inclusive practice, welcoming in a larger, more diverse group of thinkers.
- Post-COVID, the way we think about what learning looks like will inevitably change, so it's crucial to adjust and begin building the necessary support systems today.
Scientists uncovered the secrets of what drove some of the world's last remaining woolly mammoths to extinction.
Every summer, children on the Alaskan island of St Paul cool down in Lake Hill, a crater lake in an extinct volcano – unaware of the mysteries that lie beneath.
The coronavirus pandemic has brought out the perception of selfishness among many.
- Selfish behavior has been analyzed by philosophers and psychologists for centuries.
- New research shows people may be wired for altruistic behavior and get more benefits from it.
- Times of crisis tend to increase self-centered acts.