As the government spends more to finance its contingent liabilities, the cost of capital in China should rise, Huang writes.
But factors including "the negative sentiment among MCI customers toward a Qwest combination" and "Qwest's contingent liabilities" have raised doubts about the financial viability of the deal.
But if the public debt and contingent liabilities remain majority owned by domestic residents, then China is more likely to experience growth stagnation like Japan instead of an outright debt crisis.
Even including contingent liabilities, total public debt remains manageable.
He should also reveal the extent to which various commitments for economic, financial and energy-related assistance, notably through the device of government-guarantees for U.S. exports, will expose the American taxpayer to new contingent liabilities.
Drawing from international experience, the World Bank suggested that China could raise contribution rates, or use general revenues or dedicated social security taxes to cover contingent liabilities, in addition to direct transfers of state-owned assets.
Reluctant to further expand the government's balance sheet both for political reasons and for fear of forfeiting the confidence of markets, he is planning instead to expose taxpayers once again to large contingent liabilities in the hope that these policies spur sufficient growth to ensure these liabilities never crystallize.
The big conclusion of the study is that governments - and the IMF - need to understanding their 'contingent' liabilities as well as the liabilities they can see right now, especially in the financial sector.
BBC: Debt and the crisis: How did governments get it so wrong?
Many companies also fail to report some contingent trade-finance liabilities.
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