China’s high-speed debt train picks up pace

Of the many risks that threaten to derail the world’s second largest economy, burgeoning local government debt has the potential to inflict the most pain.

For the past few days, I have been travelling in China, working my way from the mega metropolis of Shanghai to regional cities like Guilin. I have been impressed by the country’s new airports and high-speed railway lines. At the same time, the empty buildings that I glimpsed from the window as we zoomed through the countryside made me wonder who is paying for all this.

Chinese local government debt, a cooling property market and excess industrial capacity are the three biggest risks facing the world’s second largest economy.


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