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  • In the aftermath of the global financial crisis,

  • China's manufacturing and export-dependent economy crumpled,

  • and the ruling Communist party panicked.

  • Party leaders estimated they needed to sustain a minimum annual growth rate of 8%

  • if they were to contain political unrest that could threaten authoritarian rule.

  • The solution was to unleash what economists have called

  • "the greatest example of monetary easing in history,"

  • an enormous wave of easy loans channeled through the state-owned banking system.

  • In absolute terms,

  • China's total debt has ballooned from around 6 trillion dollars at the time of the financial crisis

  • to nearly 28 trillion dollars by the end of the last year.

  • As a percentage of GDP,

  • total debt has risen from 140% to almost 260% over the same period.

  • There is no question that the Chinese economy was saved in the short term

  • by the government's decision to open the credit floodgates.

  • But that has resulted in an economy addicted to borrowing

  • and afflicted with serious asset bubbles.

  • The ultimate test will come when Beijing eventually

  • attempts to wean the country off this debt dependence.

In the aftermath of the global financial crisis,

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China's debt explosion

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    Jerry posted on 2017/08/18
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