Chinese officials surely appreciate the risks associated with rampant debt growth. They have carefully studied the Japanese experience and have surely studied the history of financial crises. Beijing has had ample time to research Bubbles, yet they still have limited actual experience with Credit booms and busts. China has no experience with mortgage finance and housing Bubbles. They have never before managed an economy with a massively leveraged corporate sector – with much of the borrowings via marketable debt issuance. They have no experience with a multi-trillion (US$) money-market complex – and minimal with derivatives. Beijing has zero experience with a banking system that has inflated to about $40 TN – financing a wildly imbalanced and structurally impaired economy (not to mention fraud and malfeasance of epic proportions).
