China’s credit has kept investors awake for at least a decade. For years, the question has been to ask when the country will finally succumb to a “Minsky moment”, when investors realise that current levels of debt are untenable and take flight.
But now the question is morphing. Nothing much has changed to make anyone any more comfortable about Chinese debt. In the decade since the financial crisis, the country’s banking assets have expanded from being worth twice gross domestic product in 2008, to triple gross domestic product now. (For comparison, bank assets in the US, epicentre of the crisis, never exceeded GDP).
But the ability of central planners to delay, extend and defer the inevitable is growing evident. China-watchers think the crash will come some day, but have no idea when. It will certainly not come until well after the communist party’s congress later this year is safely over. There is little point in trying to plan for it. Instead, a growing source of worry on the horizon comes from the US.