Awash in assets, China well-placed to ride out any financial crisis, top academy says
Nation's net assets provide plenty of room to withstand a major economic blow, study finds
With its net assets having surpassed those of the United States, China is well positioned to deal with any major financial crisis, according to a study by the Chinese Academy of Social Sciences.
The net assets of the world's second-largest economy reached 352.2 trillion yuan (HK$445.77 trillion) in 2013, which was more than six times its gross domestic product of 56.9 trillion yuan in the same year. The net assets of the US, the world's largest economy, were US$55 trillion in 2013, or 340 trillion yuan, according to the exchange rate at the time, the academy said.
Some might doubt the eye-popping numbers as they suggest China is the world's wealthiest nation. But an academy expert cautioned that China used a different method from other nations to measure assets.
Total sovereign assets, which also cover holdings of state-owned enterprises and the government - including executive departments, legislative and justice departments - increased from 35.9 trillion yuan to 227.3 trillion yuan between 2000 and 2014, largely due to the rapid expansion of state businesses.
Net sovereign assets last year reached 103.3 trillion yuan, if calculations exclude the 124 trillion yuan in sovereign debt.
The net assets of state-owned firms increased by 126.4 trillion yuan between 2000 and last year, but the report didn't specify the total amount they owned. They saw their fastest expansion after the century turned, largely due to their grip on strategic sectors, such as banking and telecoms.
Even if a financial crisis wiped out 30 per cent of gross domestic product, China could weather a single such blow and half as much again, Zhang Xiaojing, an academy economist and co-author of the report, was quoted by the National Business Daily as saying. The report contradicts fears raised by overseas investors that China faces a hidden debt bomb. The country was unlikely to suffer a sovereign debt crisis, given it had enough sovereign net assets to cover its liabilities.