the usa's debt dwarfs china's debt ..., page-55

Herc

Thats the problem it may all turn to fear and loathing very quickly, the wests consumption founded on expanding debt is the other side of the same coin as the easts expansion of production based on the same debt, if your factory builds to much production and your customer collapses then your in just as much trouble as the customer.

There are statistical holes in the Chinese story, lending tripled last year , yet delinquency fell? Production of autos increased substantially, yet gasoline consumption fell by 8%. Oil consumption is something that can be measured from outside the country, the suspicion being that over capacity is being built into all the production sectors. Why would we be anymore confident that Chinese government owned banks are any better at lending that the wests banks?

The Chinese economy could face collapse in the next 6-24 months, the ability of the Chinese government to stop that if the rest of the world has another crisis is very limited.

A lot of the downturn in China has been re mediated by borrowing from provisional government, they issue bonds to the population and use the money to build infrastructure, a lot of this infrastructure is not revenue earning and while it serves to employ folk and boost consumption it wont go on much longer when there has been such a large downturn in exports, put simply the Chinese economy is borrowing its way through the GFC

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http://business.asiaone.com/Business/News/Story/A1Story20100303-202136.html

Victor Shih, a professor of political science at Northwestern University, said in a recent report that he had examined the debt levels of 8,000 local government investment entities and concluded that they had borrowed the equivalent of $1.6 trillion between 2004 and the end of 2009.

That is roughly one-third of 2009 GDP. China's official public debt is only 20 percent of GDP.

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The difficulty they face is now the debt cat is out of the bag its hard to put it back in, if they crack down on lending its likely to cause a wave of defaults as projects dont get funded, if they let the debt cat run and continue lending they could face runaway inflation that they have no way of stopping.