China’s collapse

China’s coming collapse

China's planned $463 billion bail-out of local governments gives a good indication of how big its coming financial crisis will be — about 1.5 times bigger than America's.
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China's CPI rose 5.3% year on year in April, driven by increasing food prices (AFP)
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<div style="text-align: left;"> China's CPI rose 5.3% year on year in April, driven by increasing food prices (AFP) </div>

It became clear last week that China has probably not dodged the financial crisis at all, after Beijing quietly agreed to bail out local government to the tune of $463 billion.

Adjusted for the size of its economy, that rescue package is one-and-a-half times bigger than the Tarp bailout. That is particularly worrying, according to Dylan Grice, a global strategist at Societe Generale. “If we calibrate the magnitude of the economic crisis with the size of the bail-out, one-and-a-half Tarps implies a financial crisis one-and-a-half times the order of magnitude of 2008.”

The bail-out is aimed at cleaning up the vast pile bad loans made to local...

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