I had thought the government is intentionally is allowing this to happen to avoid a catastrophe by expanding the bubble? Maybe I got my wires crossed, because from your comment it seems that they're trying to figure out a solution.

[–] xiaohongshu@hexbear.net 11 points 3 days ago (1 children)

For me the fundamental problems are that

China’s central bank has no mechanism for debt cancellation, which has resulted in the perpetual refinancing of the debts (borrowing cheaper to pay back expensive interests) and thus its vulnerability to the Federal Reserve interest rates (the US practically controls how easy China’s local governments can pay back their debts)
The government operates its spending as if it is still in the gold standard era but with dollar as the reserve currency. It has very limited ability to expand its base currency without earning foreign reserves or through issuing collateral backed debt (e.g. repo, SLF, MLF etc.) so they cannot directly print money to increase the people’s wages to spend. (Of course, this also has to a lot to do with the government committing to an export-oriented economy)

It’s trying to solve the problems with your hands tied.

[–] SkingradGuard@hexbear.net 3 points 3 days ago

Right. Very insightful