China has too much debt to bail out either its own or the global economy. From Thomas Malinen at gnseconomics.com:
We have been monitoring China closely since March 2017. We were one of the first to show that China had driven the global business cycle since 2009 and that the remarkable recovery of the world economy from the 2015 slump was mostly China’s doing.
Now that the world economy is, again, heading down, many are wondering, what will China do? The unfortunate answer is that it can most likely do very little. Her ability to stimulate the economy by increasing debt is almost completely gone. This means that the world economy is heading into a recession.
The limits of stimulus
China has been very aggressive in its efforts to curtail any deeper contraction in its economy. This has produced some remarkable trends, like the relationship between China’s GDP and total debt shown in Figure 1.
