There has been growing concerns from investors about China's growing debt. In the article, George Soros states that there seems to be resemblance to the conditions that lead up to the financial crisis in the US in 2008. According to him, " it's similarly fueled by credit growth and an eventually unsustainable extension of credit."
However , Jing Sun, the author of the article suggests that there are some major differences between the conditions that the US faced and current conditions faced by China. One of the conditions is that the household debt in China is far below the levels that the US faced before the crisis.Also, the household savings in China are twice as large compared to the debt.
Another major different pointed out is that Chinese residential properties are usually purchased with significant down payments. China's high savings rate and low leverage makes it very unlikely for a financial crisis to be caused by households.
Moreover, Chinese banks get 70 percent of their money from deposits while the US in 2008 was dependent on short time money market funding. There is no denying to the fact that Chinese economy is facing many challenges including the slower growth rate and shadow banking but the chances of a financial crisis are low.
http://www.bloomberg.com/news/articles/2016-08-28/digging-into-china-s-growing-mountain-of-debt
Digging into the debt we owe china is not going to be a over night thing. Its entirely too much money to think of it like that. Our goal should be to have this handled by the time our grandchildren our here cause they shouldn't have to pay for our mistakes.
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