China Can Avoid a Hard Landing but not an Ultimate Reckoning

the idea that China can “grow” out of the debt problem once again by keeping investment high is wrong. First, it would only increase capital misallocation and debt levels, and would require even lower growth in the future. We can’t keep pushing the cost off into the future, as attractive an option as that always seems. Second it would put unbearable pressure on household income and consumption, and so ensure that the one thing China needs above all – a rapid rise in household consumption – is all but impossible.

China: Small Company Crack in the High Growth Armor

Small and medium enterprises (SMEs) are by far the most efficient part of the Chinese economy and the only part creating real value. My experience in other developing countries suggest that SME owners tend to be the most sensitive to and aware of changes in risk, and if we start to see rising bankruptcies among SMEs, coupled with disinvestment and increasing capital outflows, that is almost always a very worrying sign. When SME owners start to worry, so should we.