Quote Originally Posted by Uboat509 View Post
it is great for banks because it gives them a large buffer of cheap capital. This gives them plenty of cheap money to lend to state champions and local governments.
They also lend it, increasingly and in massive quantities, to the well-connected and extraordinarily wealthy elite that straddles government and "private" enterprise. Crony lending is a huge issue, and nobody has a clue what the banks actually have on their books in terms of bad loans.

Of course the Chinese government can bail out the banks, but whether or not they can bail out the companies that incurred those loans is another question. If a company borrows, builds a dozen skyscrapers that end up empty, and goes bust... ok, the bank cam be bailed out, but the company isn't going to keep building skyscrapers (though the people behind that company, closely connected to those running the banks and those staging the bailouts, will have salted their share away). That means a whole lot of unemployed workers, and a whole lot less demand for steel, concrete, etc.

It will be interesting to see where it all goes and there's absolutely no certainty about outcomes, but anyone who thinks the Chinese have created a superior economic model that's bound to swallow the world is barking at the moon.