The Great Chinese Crash

The Great Chinese Crash. A BBC documentary on the modern Chinese economic miracle and its aftermath. Australia is quite dependent on Chinese demand for our raw materials, but looking at the ongoing economic slowdown, ghost cities, and debt mountain shows that there is prolonged stagnation ahead.

Al Fin comments:

China’s debt mountain is expanding much faster than its real economy. Much of the debt is secured by highly leveraged assets valued at massively inflated valuations. … China’s economic facade is mostly flash and little solid substance. The Communist Party government is under tremendous pressure from the expectations of ordinary Chinese people.

In response to the worldwide slowdown in money manufacture that ushered in the Global Financial Crisis in 2008, China became the world’s largest money manufacturer, to keep the growth going. This sparked an enormous bubble in China: China used more cement between 2011 and 2013 than the US used in the entire 20th century, and iron ore prices rose hugely on Chinese demand. But within a few years that strategy become unsustainable, leaving mountains of debt (modern money manufacture creates matching debt) that now have to be dealt with.