Reading Michael Pettis: What Does an Evergrande Meltdown Mean for China? [Ep. 119]
Eurodollar University
00:00
The Problems With China's Debt
Chinese debt has risen sharply for more than three decades but until the mid-2000s it attracted little attention. This is because most of the increase in debt went to fund productive investment with the result being that China's GDP rose at least as quickly as the debt. But this changed around the mid- 2000s when debt began rising faster than GDP. The fact that over many years debt-serving servicing costs accelerated even as debt-servicing capacity decelerated was clear evidence of systemic malinvestment eventually on a massive scale. Beijing must make important political trade-offs.
Play episode from 16:25
Transcript
