China's debt pile has mushroomed in the past few years, warns the Bank for International Settlements (BIS). Its total public and private debt load is now 255% of GDP. It's the speed of the increase that is alarming: the pile has grown from 147% of GDP in just seven years.
Investing so much capital efficiently is a tall order, so it's no wonder that $1.4trn has been lent to companies without enough cash flow to meet interest payments, while it now takes three units of credit to produce one more unit of GDP, according to the International Monetary Fund.
A Lehman-style collapse is unlikely, as all banks are owned by the state and can be forced to keep lending. But perpetually rolling over debt to lousy companies would eventually sap the economy's vitality, as The Daily Telegraph's Ambrose Evans-Pritchard points out, creating a zombie economy.
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