in the aftermath of the global financial
crisis China's manufacturing and export
dependent economy crumpled and the
ruling Communist Party panicked party
leaders estimated they needed to sustain
a minimum annual growth rate of 8% if
they were to contain political unrest
that could threaten authoritarian rule
the solution was to unleash what
economists are called the greatest
example of monetary easing in history an
enormous wave of easy loans channelled
through the state-owned banking system
in absolute terms China's total debt has
ballooned from around six trillion
dollars at the time of the financial
crisis to nearly 28 trillion dollars by
the end of last year as a percentage of
GDP total debt has risen from one
hundred and forty percent to almost two
hundred and sixty percent over the same
period there is no question that the
Chinese economy was saved in the short
term by the government's decision to
open the credit floodgate but that is
resulted in an economy addicted to
borrowing and afflicted with serious
asset bubble the ultimate test will come
where Beijing eventually attempts to
wean the country off this debt
dependence