China is now on that part of the credit cycle that eventually ends in a credit implosion. There is no “soft landing” although they certainly will try. China has had the greatest credit bubble in modern history. The broadest measure of money supply, M2, has surged by 55% over the past two years, and loans have climbed 60% to 47.4 trillion yuan (about $6.8 trillion). Considering that China’s economy is less than half the size of the U.S. that would be like $14 trillion or more in loan creation in the U.S.
Furthermore, much of the GDP consists of residential and commercial construction of properties which remain empty. That’s not productive growth!
Governmental statistics in China are “unreliable.” So, to see what the economy is doing, a good proxy is electrical output consumption. After all, it takes electricity to run factories, light offices and homes, and keep the economy going. In October year-over-year change in electrical output dropped below zero.
My forecast is that when the China bubble bursts it will be like a Tsunami through the global financial world. Will you be ready?