Just How Big Is China's Bubble? This Will Blow Your Mind

china concrete

We often talk about how out of touch with reality China’s massive credit and economic bubbles are (see below). However, when we start talking about $15 Trillion here and $21 Trillion there we oftentimes lose touch with reality as such numbers become too big to comprehend.

The chart above looks at the subject matter in a different fashion. Between 2011-2013 China has used more concrete than the US has over the last 100 years. And while some might see this as evidence of an economic miracle, I will take the other side of the trade. This unbelievable boom in concrete use is a symptom of capital missalocation, malinvestment and a giant credit bubble that is ready to blow.

Here are just a few more bits about China that should scare the bejeezus out of you.

Chinese corporate borrowers owed $14.2 trillion at the end of 2013 Vs $13.1 trillion owed by U.S. corporations.
This means that as much as 10 percent of global corporate debt is exposed to the risk of a contraction in China’s informal banking sector.
Cash flows and leverage at Chinese corporations are the worst among global peers, having deteriorated from being the best in 2009.

As I have mentioned in the past, most of China’s economic growth over the last 5-6 years has been financed by massive credit expansion. The likes of which we have never seen before. The result?

$21 Trillion Debt Mountain. Roughly the same size as the entire US Banking Sector. It took the US 220 years to get to that number, it took China just 5 years of explosive credit growth.
$6 Trillion In Shadow Banking. Actually, no one knows how large this number is. I have read good data/reports putting this number at $10-15 Trillion range.
Empty cities, shopping centers, massive speculative bubble in real estate, built out infrastructure, rising cost of labor and export driven economy.

How much longer can this go on? Well, that’s a Trillion dollar question…..or a $40 Trillion dollar question. Apparently, it is already unraveling. Either way, one thing is for sure, this will not end well nor will it end in an orderly fashion.