Shame Is forgotten, Debts Are Not

Shame Is forgotten, Debts Are Not

‘Debt is roaring back in China’, or so Bloomberg told me last week.

It turns out that the past two years of Chinese officials reducing local banks’ lending ability is nearing the end.

Debt and the supply of money is back in vogue in China, with Bloomberg writing, ‘From bank loans to trust-product issuance to margin-trading accounts at stock brokerages, leverage in China is rising nearly everywhere you look.’

Shoving the US$34 trillion in total government and corporate debt aside, the question remains if China can have a more balanced, debt-fuelled, growing economy.

That’s in stark contrast to Jim’s second article today.

The Chinese economy may continue to grow.

But as Jim says, the Middle Kingdom is going to be hit by the law of ‘diminishing marginal returns’.

In other words, China is most likely reaching the point where more and more debt equals less and less growth.

And China may be approaching the point where excessive debt levels send the economy backwards.

Now, read on for Jim’s analysis.

Until next time,

Shae Russell Signature

Shae Russell,
Editor, The Daily Reckoning Australia