Debt bedevils both the US and China

<p>Kia ora,</p><p>Welcome to Tuesday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.</p><p>I'm David Chaston and this is the international edition from Interest.co.nz.</p><p>And today we lead with news debt woes continue to bedevil the world's two largest economies.</p><p>In the US the debt-limit talks drag on, casting a pall over markets. Public statements are all positive about "progress", but there is no deal and markets are growing weary (and wary) about all the unnecessary theatrics. Trading volumes on equity markets have suddenly gone quiet.</p><p>US households are also feeling uneasy at their own financial situation. <a href="https://www.federalreserve.gov/consumerscommunities/shed.htm" target="_blank"><strong>An updated Fed survey</strong></a> of household economic attitudes shows the effects of inflation on Americans' economic confidence. About 73% said they were doing "at least okay financially" in 2022 which is down a sharpish -5 percentage points, the most since the survey was launched a decade ago. It had stood at a record high the year before but now it is at its lowest since 2017.</p><p>China has reviewed its key policy rates and left them <a href="http://www.pbc.gov.cn/rmyh/108976/index.html#LPR" target="_blank"><strong>unchanged</strong></a> in its May reviews The People's Bank of China (PBoC) maintained its key lending rates steady for the ninth straight month at May fixing, as widely expected. The one-year loan prime rate, which the medium-term lending facility uses for corporate and household loans, was left unchanged at 3.65%; while the five-year rate, a reference for mortgages, was kept at 4.3%. The move came after the central bank held its medium-term policy rate at 2.75% last week.</p><p>But in the background, China's hidden local government debt, which <a href="https://www.caixinglobal.com/2023-05-22/cover-story-china-ramps-up-efforts-to-tackle-hidden-debts-102057722.html" target="_blank"><strong>could be as high at US$10 tln</strong></a>,