Will China Face An Economic Crisis?

As with many authoritarian states, China’s economic growth numbers can look amazing – almost too good to be true.

Constant growth, expanding wealth, seemingly unstoppable dominance – China has effectively convinced many of its inevitable rise.

But what if the foundation of that growth is weak?

It seems that may be the case, and as a result, China risks an economic crisis.

Speaking with CNBC, Sharmin Mossavar-Rahmani – a Chief Investment Analyst – said China’s massive mountain of debt puts their economy at risk.

Specifically of concern is China’s credit to GDP ratio. It is currently at 28.8 – for comparison, the US reached a peak rate of 12.4 just before the 2008 financial crisis.

Asked Mossavar, “… if the U.S. didn’t avoid a financial crisis with all its strength, how can we assume that China will?”

China is trying to pass themselves off as the new leaders of globalism, but they’ve built their economy on protectionism, potentially false economic statistic, and gigantic mountain of debt.

Any economy can grow temporarily through debt-fuelled spending – especially when their population is growing – but as China’s population ages and growth begins to slow, they may soon discover the limits to that approach.

Spencer Fernando

Photo – Twitter

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