China is now the second largest economy in the world and for the last 30 years China’s economy has been growing at an astonishing rate, wowing the world, as spending and investment has been undertaken on a scale never seen before in human history – 30 new airports, 26,000 miles of motorways and a new skyscraper every five days have been built in China in the last five years. But as we (and Michael Pettis, George Soros, and Jim Chanos – among many others) have warned, it is all eerily reminiscent of what happened in the West… the vast majority of it has been built on credit. This has now left the Chinese economy with huge debts and questions over whether much of the money can ever be paid back (spoiler alert: it can’t and it won’t).
The BBC’s Robert Peston travels to China to investigate how this mighty economic giant could actually be in serious trouble.
As Michael Pettis, Jim Chanos, Zero Hedge (numerous times), and now George Soros have explained. Simply put –
“There is an unresolved self-contradiction in China’s current policies: restarting the furnaces also reignites exponential debt growth, which cannot be sustained for much longer than a couple of years.”
The George Soros have explained – nowhere is that more dangerously exposed (just as in the US) than in the Chinese shadow banking sector as explained above.
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Tired of reading about it? Then spend 2 minutes of your life with the following uncomfortable truth clips…
The past 5 years in China…
And here is Fitch’s Charlene Chu (in a little over 60 seconds) laying out the ugly facts that are China’s credit bubble…
Of course, the situation has become critical now as reform-imposed credit-crunch is rapidly spreading up the food chain proving that China has no painless way out and can only stoke the fire more in their already-burning house -Â as we noted here…
