You haven't answered my very simple questions. According to the IMF, the world holds the equivalent of $10,936 billion in foreign exchange reserves, and $3,442 billion of this is held by China. The Bank for International Settlements data confirms that China has the equivalent of $1,248 billion in domestic general government debt outstanding (not including local government debt).
The IMF estimates PRChina GDP at US$9trn at end 2013 and US$11 trn at end 2015, at market prices. On a PPP basis it's much larger. US$2trn of local Chinese Govt debt doesn't on its own seem unsupportable even assuming all these debts go bad (in reality maybe 30%-50% might). So local Govt debt in China is not unmanageable, at least not yet. A 7% nominal GDP annual growth rate works wonders with debt reduction. The PRC Govt needs to clarify the implicit Government guarantee, is it like GITIC 1998 - no central Government guarantee? In reality, it is more likely that the PRC Govt will extend some kind of blanket coverage in return for supervising and monitoring new local Govt debt creation and old debt writeoff where necessary. But right now, it's not Armageddon. All rating agencies confirm this, Fitch should adhere to its public responsibilities (?!) as opposed to exaggerating reports which further undermines its sovereign rating credibility and competence.
