USD illiquidity is the real threat to the Chinese (and global) economy, which makes it prudent to think of China hiking its FX RRR from this perspective.
Japanese Government Bonds are an important source of repo collateral – they serve a purpose beyond the considerations of debt sustainability & coupon payments.
Low interest rates don’t mean that creditors will keep lending to a country. So why are creditors willing to roll over Japan’s debt at ultra low interest rates?
There is another reason interest expense must be used when understanding debt sustainability – defaults occur when one fails to make interest payments.
Evergrande has finally formally defaulted. While not a surprise to markets, it did cause a plunge in the CNY; which isn’t a good sign for the rest of the world.
The Debt/GDP ratio is the conventional way of gauging a country’s ability to repay its debt. However, just because everyone uses i9t doesn’t make it useful.
QE is supposed to be a monetary bazooka that does magical things. Instead, it hasn’t done much good, while creating serious unintended consequences.