You may know, but the FT’s Martin Wolf has come up with a phrase to describe the world’s big export block, he calls it Chermany. China and Germany are similar in the sense that both have high savings, and both export more than they import.

It could be argued of course, that just as China’s currency should be more expensive, so too should Germany’s.

The snag is, Greece and the rest of the so-called PIIGS share the same currency with Germany.

But, as we have said here before, China is more complicated than that. Other parts of China are poor, and actually need a cheap currency. So that is why we have said you could describe another region of the world as Chreece.
But the analogy breaks down, we said, because the poor regions of China don’t have the same issues of debt as Greece does. Well, it appears even that is wrong.

According to Liu Jiayi, who is the top man at China’s National Audit Office, the problem of debt in some regions of China “is large, and the burden is quite heavy.” The Telegraph quoted Mr Liu as saying that “the ratio of debt to disposable revenues at some local governments was over 100pc and in the highest case it was 365pc.”

The Telegraph also quoted Victor Shih, a professor at Northwestern University in the United States, as saying “The worst case is a pretty large-scale financial crisis around 2012.”

© Investment & Business News 2013