We have been talking about China’s “ponzi” economy for well over a year now. Here is just a small sample of our previous work China’s Housing Collapse Is Already In Full Swing. It now appears that China’s massive fraud is beginning to unravels. Consider the news flow.
- China’s 2014 economic growth slowest in more than 2 decades
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China’s $20 Trillion Headache Underscored by Stock Swings
- The Scale Of The Chinese Real Estate Crash Is Terrifying
Here are just a few more bits 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.
