Bloomberg BusinessWeek, Jan 26, 2015 (I)

choi

Brian Bremmer, Is China Coming Down to Earth?  (under the heading "Opening Remarks, which is the first article of each issue)
www.businessweek.com/articles/20 ... vestment-led-growth

Excerpt in the window of print: The total debt of the world’s No. 2 economy is roughly $18 trillion, or about 200 percent of GDP

Quote: "Years of politically driven investment with diminishing returns have led to too much debt and industrial overcapacity, as well as ghost cities with unfinished hotels and absurd ambitions. (You can soon visit Tianjin’s replica of Manhattan, provided you like your replica cities free of actual humans.)

Note:
(a) The corresponding part in the text:

"the country’s total debt—government, corporate, and household—is now roughly $18 trillion, or about 200 percent of total gross domestic product. 'We’ve got the biggest debt bubble that the world has ever seen, and credit is continuing to grow [about] twice as fast' as the Chinese economy, says credit analyst Charlene Chu 朱夏蓮, a partner with Autonomous Research Asia in Hong Kong. Chinese officialdom is keenly aware of the problem. The growth model that delivered productivity spurts in the late 1990s—powered by reforms of state-owned enterprises and new technology brought in by foreign investors after the country’s admission into the World Trade Organization in the early 2000s—has lost its edge." (brackets original)

(i) The quotation comes from

Alfred Liu, Charlene Chu Says China’s Credit Risks Worsening. Bloomberg, Jan 12, 2015
www.bloomberg.com/news/2015-01-1 ... edit-worsening.html
("Debt in China was equivalent to 251 percent of gross domestic product, according to a June estimate from Standard Chartered Plc")
(ii) A few months ago I saw the 200% figure for the first time. I am skeptical. Nobody knows what is happening in China--not even Xi or (premier) Li.

(b) two consecutive paragraphs:

"Michael Pettis, a finance professor at the Guanghua School of Management at Peking University, says the Chinese experience has much in common with Brazil in the 1960s, the Soviet Union in the 1970s, and Japan in the 1980s. All resorted to what economists call the financial repression [a term in  economics, for which Wiki has a page] of households to accelerate development. Family savings were channeled primarily into bank accounts with regulated and below-market deposit rates. Banks then recycled the capital into low-interest loans for businesses to build factories at home and to export abroad.

"When it works, and it did stupendously for China, the economy hits the fast lane and incomes grow so fast that consumers don’t mind getting low returns on their savings—or being ruled by an unaccountable one-party state. Unfortunately, research by Pettis shows, 'every investment-led growth miracle in the last 100 years has broken down.'

* The last sentence, the quotation is from

Michael Pettis, How to link Australian iron with Marine le Pen. Oct 19, 2014 (blog)
blog.mpettis.com/2014/10/how-to-link-australian-iron-with-marine-le-pen/

Please read, in the blog, paragraphs 5 and 6 in the section whose heading was “Rebalancing demand for metal.”