From Tyler Durden at zerohedge.com:
Ever since 2010 we have explained that one of the biggest risks facing the world is China’s gargantuan mountain of debt, seen in its consolidated state in the following McKinsey chart…
… a mountain which has doubled from its 2007 levels of 158% of GDP and which as of Q4 2015 is well over 300%, as China races to catch up with world-record holder Japan and its 400%+ total debt/GDP.
As we have also explained repeatedly, the problem with China’s debt load is that while it was China’s historic leveraging spree in the years of the great financial crisis, the world’s most populous nation, where debt has been rising exponentially, appears to be approaching its debt capacity load, and as such when the developed (and emerging) world slides into its next recession, there will be no “growth dynamo” which can add trillions in new debt to kick start world growth once more.
Another problem with China’s financial system is that in mid/late 2014, Beijing decided to implement a purge of the country’s shadow banking system, where “anything used to go”, and which while long overdue resulted in the shuttering of one of the country’s most permissive lending channels and led to a dramatic slowdown in the non-loan growth of China’s Total Social Financing, its broadest consolidated monthly credit creation tracker. The immediate result was the global growth swoon from the winter of 2014 which was incorrectly blamed on “harsh weather.”
To continue reading: China’s Cost to Avoid The Dreaded Working Class Revolution
