It's China's turn to wrestle with a pile of bad debt

I expect effects on China's economy will be the biggest story of the 10's or 20's. So many things were lined up to make the system they had work, educated but under employed labor, a voracious appetite in the world for their cheaply manufactured goods, and a relatively docile population. Every single one of these 'advantages' seem to be deteriorating.<p>So the new learning we'll get this time around is if the Chinese version of Communism can keep the economy from driving off a cliff or not. If not, will it kill communism in China?, or the world's economy? or both? And how will the folks in power respond?<p>Very interesting times indeed.

This article reminds me of a Cringley article that was written not too long ago, where he speculated that this was going to be India's century rather than China's, and China would have a decade instead. - <a href="http://www.cringely.com/2010/10/the-chinese-decade/" rel="nofollow">http://www.cringely.com/2010/10/the-chinese-decade/</a><p>It also reminds me of seeing a report on infrastructure projects in Japan, with bridges going to nowhere and other crazy construction projects, all designed to pump up the economy as well as the pockets of construction companies owned by cronies.<p>It will be interesting to see how and where it goes, and I hope that Australia can diversify its economy - from mining and sending ore to China - to something else before China experiences any hiccups (or worse).

Despite the amount of hot funding going around, most Chinese are capital constrained. Small business can't get credit because they don't have the "connections", their books are cooked (no revenue = no tax, but sadly no credit; and businesses that pay tax are uncompetitive), and banks would rather loan to the government or state-owned-entities.<p>Thus, anyone who has the seed money to start a business can do very well, so the "businessmen" (even small ones) make a lot more than the workers.

I don't get it.<p>This article was confusing and badly written. The Chinese govt gave the money to local authorities to spend. Next, the article talks about bad debts showing up in audits. Was the money a straight out transfer? If so, this doesn't affect their debt position. Was the money supposed to be used for construction projects and not just used to pay down old debts? If so, this doesn't affect their debt position either. The article also talked about corruption and a "rigged system to guarantee bank profits". No details given about either issues.