Re: Huge SOE Debt Written Off

On 30 Jan 2006 18:19:43 -0800, demorising@xxxxxxx wrote:

>
>This article does not discuss the most important aspect of the
>so-called write-off: Who is swallowing the loss? It seems the article
>is saying that only about 20% is going to be recovered. So who absorbs
>the 80% loss is the most crucial question. Above PaPaPeng suggests that
>foreign reserves might be used, but I haven't seen anything definitive.


Like China's earlier USD 40 billion write-off of bad loans this will
be a draw down on China's huge foreign reserves. China's treasury
therefore bears the loss, USD 105 billion in this instance. In case
you want to say the CCP robbed the people off their money your
argument would have been nonsense for this kind of money was never
meant for the public (such as given in a tax rebate.) You are trying
too hard to find voodoo economics where the mechanism of this State
Owned Organizations (emphasis on State Owned) debt paydown is very
straightforward and simple. China's trade surplus this year alone
should exceed USD 200 billion and can easily pay this off.

The alternative will be to let the SOE's fail, suddenly throw millions
out of work and let billions of yuan in equipment and property
disappear. That would be a chaotic situation with even more
unpredictable consequences. The current two stage write off allows an
orderly demise of a otherwise dangerous socio-political problem.
Stage one was to remove the non performing parts of SOEs so that the
remaining parts can function profitably or at least be wound down in
an orderly way. Having stopped the bleeding and having established
the actual loss it was easy enough to write off these losses because
the government has the money. Its like a parent paying off the son's
debts.

The other articles I had included as evidence that the government is
sincere in its policy to stick to the duties government because that
is what governments should do. Stay out of making money, a activity
best left to people whose business it is to make money. To do both is
corrupting and dangerous. The CCP cannot say this as a public
statement. No government can. But watch what they do and draw your
conclusion.

One article says that government appointed managers will be allowed to
enjoy some of the profits from their enterprises. But they will never
be allowed to treat them as their own private fiefdoms a practice
common in western government owned (privatized) corporations. There
will always be (China) state owned enterprises such a hydro-electric
generation, nuclear power stations, national oil companies. These
will have to make a profit but must always work for the public good
and therefore responsive to public policy

The other article on the divestment of commercial activities from the
PLA is another very critical policy decision. The military should
perform military functions only. Their sojourn into owning factories,
hotels, etc. was a corrupting abberation.
.

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