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.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
MoneyWeek news quiz: How much can you win in Premium Bonds?Quiz Premium Bonds, ChatGPT, and the start of the festive season all made headlines this week. How closely were you following the news?
-
Salary sacrifice pensions cap: 3.3 million workers to be hit by contribution limitsThe government has revealed further details of its controversial cap on pension contributions through salary sacrifice. Here is how the changes could affect you
