Just a follow up to our last post. This chart from the IMF illustrates how China was able to skirt — in relative terms — the deep economic contraction by generating a huge expansion in domestic credit and increase in its money supple. This, while credit was contracting in the rest of the developed world.
Imagine the politics of, say, the U.S. administration or state and local governments ringing up Citibank and Bank of America and telling ordering them to extend credit to a construction company to build the country’s largest shopping mall? Great policy until the mortgage has to be paid. The tremors, of which, are now being felt in China’s financial sector.
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