Precisely, ironically, that article even touched upon the all important difference between Chinese debt and developed economy debt by stressing the fact that China is in the process of transitioning from an investment driven economy to a consumption driven one.
Since all of that debt was accumulated when China's growth was very much investment drive, the lion share of that debt would have been taken out to finance investment.
In contrast to developed, consumption driven economies who overwhelmingly borrows to consume.
In many respects, I fundamentally disagree with the established consensus that investment driven economies need to transition into a consumption driven one, or that such a transition is necessarily a good thing.
In may view, this focus on the need to formally shift from investment to consumption is wrong because it is mistaking effect for cause.
In my view, the fundamental shift isn't so much in terms of the main activities an economy engage in, but rather reflects on the changing distribution and spending power on different segments of the economy.
When a country is poor, its people are poor, so have very little spending/purchasing power.
As such, it is up to governments to spend big (relative to what the rest of the economy could spend) to develop the economy, create jobs, and generally generate demand and create wealth, and the best way to do that is to invest.
As all that government spending and investment pays off, and both private companies and middle class get richer and increase in number, their spending power relative to government spending increases and thus plays an ever increasing part in the overall national economic picture.
At some point, an economy becomes so developed that continued investment becomes less and less efficient, at which point the government needs to look to re-direct its spending to get the best value for its money.
This is where the much hyped transitional period starts.
However, I believe the key test of whether an economy can break through the so-called middle income trap is not how well it can transition from an investment led economy to a consumption driven one, but rather how well it invested up to that point to make its citizens rich enough that their normal economic activity becomes sufficient to sustain and drive the economy.
Another key requirement to breaking through the middle income gap is what the government does with its money rather than invest them at home.
The classic mistake is for governments to buy wholesale into this transition to consumption nonsense and start spending on non-income-yielding activities like social welfare.
Good social welfare programmes is a perk rich economies could afford because they are rich, it is not a pre-requisite or advisable route to becoming rich in the first place in the same sense that nice designer label clothes and sports cars are luxuries the rich can afford to treat themselves with, but which one does not become rich by spending on before you can afford them.
In my view, when domestic investment becomes less and less efficient, a good government should instead look for better investment opportunities abroad - FDI. Its still investment, only abroad. It still yields a good return, so your pile of money continues to grow.
In addition, I believe there is an additional stagnation trap that much of the rich world is trapped in, but which they are too proud to ever admit, and instead insist what they manage is the best that could possible to achieved.
The key reason for rich economy stagnation trap is the hollowing out of its domestic manufacturing.
Sure, outsourcing manufacturing to development countries yielded massive immediate profits for western firms and economies, but in the medium to long terms, that is turning into a disaster for rich economies.
You do not in effect jettison an entire tier of the economic activity chain without suffering for it later.
What many western economies have effectively done is sell the goose that lays the golden egg.
Sure, they got a massive pile of cash upfront for it, but that pile is ever diminishing, whereas the gold pile of the developing economies they sold the goose to is always growing.
I know modern finances can perform all sorts of fancy tricks, but the one thing it cannot do is create wealth out of thin air.
I think we much vaunted western financial sector is deeply flawed. It doesn't really create wealth, just the illusion of it, which is dependant on unsubstantiated optimism and hype.
The values of shares rise now not because a company does particularly well or because the real value of the company is really worth anywhere close to its market capitalisation, but because everyone expect its share price to keep rising, and so thrown money at it in order to ride the boom. That in effect creates its own little feedback loop, where the more a share rises, the more people wants to buy it, which in turn drives the price up further.
The problem is that that rise is not based on anything real or substantive, so when for whatever reason market confidence dips, the whole thing slams into reverse.
It is a deep tragedy that China blindly has allowed its stock market to follow this flawed and toxic western example.
