''OF THE many things that are worrying investors around the
world, from tumbling oil prices to the spectre of recession and
deflation in Europe, one of the most important, and least understood, is
China’s debt. For the past few years China has been on a borrowing
binge. Its total debt—the sum of government, corporate and household
borrowings—has soared by 100% of GDP since 2008, and is now 250% of GDP;
a little less than wealthy nations, but far higher than any other
emerging market (see article).
Since most financial crashes are preceded by a frantic rise
in borrowing—think of Japan in the early 1990s, South Korea and other
emerging economies in the late 1990s, and America and Britain in 2008—it
seems reasonable to worry that China could be heading for a crash. All
the more so because the nominal growth rate, the sum of real output and
inflation, has..''
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