China's Debt: The Consequences of Bingeing on Debt

The rapid expansion in China's debt/GDP ratio has raised concerns among many observers, including us, because it is reminiscent of prior credit booms that have ended badly. Having watched Beijing repeatedly stimulate its way to higher growth, investors ask why this can't continue. Bluntly, if credit continues to outpace GDP growth significantly, we expect one of two scenarios to eventually occur. The first scenario is a full-blown credit crisis. Here, we'd see credit availability sharply contra...