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At this point China's debt bubble is too large to have a "bailout" from the West. China will have to do it on their own. The ratio of debt growth to GDP growth
by AJ007 10y ago
At this point China's debt bubble is too large to have a "bailout" from the West. China will have to do it on their own. The ratio of debt growth to GDP growth looks pretty grim as of 2016. Without having experienced an economic correction in such a long time it is possible even many of the companies which appear strong, innovative, and important have serious underlying problems which were easily masked by growth.
Japan may be a rough guiding point to China's future path. After the growth miracle ends, a decision has to be made on the debt. Whichever decision is made the debt will be absorbed by someone. Like Japan, China can continue to do amazing things but the consequences of that debt will throttle back future potential, especially if China's economy fails to rebalance and they choose the Japan option (zombie debt.) The greater geographic size, ethnic diversity, and far lower GDP per capita may make it much more difficult for China to pacify the population during a economic disruption.
China matters a lot but drawing a linear line upwards based on previous trends is a big mistake.