Anyone who has read us for very long knows that we’ve long been skeptical of the “Chinese Dream.” Back in 2011-2012 when union leaders and others were explaining to us that “state capitalism,” that is crony capitalism, worked because it was in China we urged caution. We argued that the economic data which came out of China was of poor quality. We argued that an economy based on patronage and centralized decree was destined for trouble. We argued that since prices weren’t free in China it was just a matter of time before real pain was felt.
Well, we are seeing that pain now. Planners will always create inefficiencies in markets. If planners create enough inefficiencies disaster is the result when these inefficiencies implode on themselves. Think of little bubblets throughout the economy based on artificially created prices. When reality hits they collapse, often at the same time. Now consider how many bubblets exist in a centrally planned economy like China.
(From Seeking Alpha)
“We judge that China’s debt situation has probably passed the point of no-return and it will be difficult to grow out of the problem,” states a report by Bank of America’s chief strategist David Cui.