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Chinese debt bomb


Rushen Spy

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The growth of corporate credit in China has been excessive in the last five years. This credit boom is related to a substantial increase in investment after the Great Recession.
 
In the United States, the “debt crisis,” as Nassim Taleb called it, has not been corrected by corporations pursuing an intelligent strategy to reduce their debt. Chinese companies, however, have been following suit. Their profitability is deteriorating more and more. Some believe that the Chinese corporate debt is akin to a mountain; others, to a time bomb.
 


 

 
How will this disruption to international markets caused by China affect the Isle of Man economy? Will it lead to an even worse worldwide meltdown to the one the United States caused a decade ago and which many Austrian School economists and now even Kensyian school economists like the partisan buffoon Paul Krugman say is going to look like a picnic in retrospect compared to the next impending economic collapse.
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China’s debt is basically held internally. There may be quite a lot of money illusion about where people think they are rich while in fact owning worthless paper but at an economic level the assets and debts are basically owned by the same entities and cancel out. 

It'll damage the banking system and investor confidence but that’s happened multiple times before and will come back eventually. 

Touchwood it’ll reduce Chinese exceptionalism. They’re a middle income country with loads of political and economic blockages. Touch wood they can continue reforms and reminding Xi Jinping he isn’t Mao is probably a good thing. 

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