“Few dispute that China is in trouble. Credit has been stretched to the limit and beyond. The jump in debt from 120pc to 260pc of GDP in seven years is unprecedented in any major economy in modern times.
For sheer intensity of credit excess, it is twice the level of Japan’s Nikkei bubble in the late 1980s, and I doubt that it will end any better. At least Japan was already rich when it let rip. China faces much the same demographic crisis before it crosses the development threshold.It is in any case wrestling with an impossible contradiction: aspiring to hi-tech growth on the economic cutting edge, yet under top-down Communist party control and spreading repression. That way lies the middle income trap, the curse of all authoritarian regimes that fail to reform in time.< Yet this is a story for the next fifteen years. The Communist Party has not yet run out of stimulus and is clearly deploying the state banking system to engineer yet another mini-cycle right now. One day China will pull the lever and nothing will happen. We are not there yet."