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...