Looks like the money machine in China is showing signs of toppling under it’s own weight:
The audit office said the loans have reached $1.7 trillion (£1 trillion). While some of the money has been used to finance much-needed investments in water systems and roads, a large part has fuelled unbridled construction with a dubious rate of return.
The local governments depend on land sales for 40pc of their revenue so the process has become incestuous and self-feeding. Such reliance on property sales revenues has greatly aggravated the post-bubble crisis in Ireland.
Mr Cheng said China is entering a “very tough period” as growth runs into the inflation buffers, threatening the sort of incipient stagflation seen in the West in the 1970s and leaving the central bank with an unpleasant choice. “The inflation rate and the growth rate are conflicting with each other: it is very troubling,” he said, describing what is known to economists as the Phillips Curve dilemma.
Full article here.