I am not an economist but I suspect China's debt might not be such a big problem....until it is. But China is too big to fail
and before it hits China hard the world will try to save what it can so it wont hit others as well.
Ah the beauty of globalization.
>> I am not an economist but I suspect China's debt might not be such a big problem....until it is
I'm not an economist either, but I have a working memory, and I can remember being warned about Chinese debt in the early aughts. The debt has grown, weathered a global 'great' recession and the warnings continue...
The Chinese bubble is still being inflated. Chinese debt won't matter until that bubble pops. There is no evidence that the bubble is about to pop; GDP growth has been north of 6% since Clinton's first term and that rate of growth has, if anything, become more stable recently. There is still plenty of Western industry that is ripe for evacuation to Asia, and China -- for all it's changes and growth -- is still appealing for this purpose; they've kept their regulatory apparatus at bay and there are still another 500-ish million Chinese peasants to keep wages in check.
It's still too early for the inevitable snap back. It will happen, but there is some time yet.
In an economy the size and importance of China, what happens is protracted stagnation due to the debt, rather than a Venezuela style meltdown. China is repeating, almost perfectly, the Japan-scenario, with a similarly predictable outcome.
> China is repeating, almost perfectly, the Japan-scenario, with a similarly predictable outcome.
My imperfect understanding of China is stagnation is tantamount to ouster of the Politburo members, or at least the Standing Committee; they will go to great lengths to avoid that outcome during their tenure. From what I've read, the population supports the political and economic status quo so long as there is relatively discernible economic improvement decade-over-decade. If that is true, then a 3+ decade stagnation scenario might be difficult to sketch out, though the US middle class is going on 4+ decades of stagnation now [1], so perhaps that same scenario is possible in China, given enough variety of distractions from the general trend line.
China's infrastructure build-out will also lag behind the economic effects to follow by many years. I personally think it will eventually prove prescient, creating new markets for China's industrial output in the coming centuries, but it won't come without its own set of challenges. If China pulls a wildcard move like monetizing infrastructure debt, holding out promises of enormous growth on the back of that infrastructure, then they can perhaps forestall stagnation far longer than anyone anticipates currently.
[1] I've yet to see a credible rebuttal to the assertion of middle class stagnation that accounts for not just health insurance, land, and education inflation, but also terms and conditions inflation like smaller quantities for same price, or less or lower-quality health insurance coverage for same price, or inferior ingredients substitution for the same price, or better supply chain logistics yet still shipping enriched flour, for example.
