The Chinese Communist Party still controls the flow of capital. There is no real free market in China. Banks do what the Party tells them. The banks were forced to finance the construction of over $1 trillion worth of “ghost cities”. Complete large cities with apartments, shopping malls, infrastructure were constructed and remain vacant and deteriorating. There has been no return on investment. Also the banks were forced to finance the construction of China’s military buildup. Over $1.5 trillion has been pumped into the construction of all sorts of ships and military aircraft. There has been no return on the capital.
The Chinese should have paid closer attention to the sub prime lending fiasco in the United States. When American politicians forced banks to lend money for mortgages and consumer loans to people who could never repay, the American economy almost collapsed. The squandering of capital is economic poison.
China may indeed become desperate. All that military equipment is awful tempting to a desperate Chines Communist hierarchy. Taiwan and Siberia beware.
Once the Soviets reached the tipping point it was surprising how rapidly they collapsed. Could the Chinese suffer the same fate?