[kayewiggin]

Deflation by itself, sure. Deflation when coupled with huge and increasing debt to service, then you have a crippling problem. That means your ability to pay off your debt gets harder and harder as time goes on, and most of your income goes to service debt principal and interest, and not on actual income growth. China plans a record $411 billion special treatment treasury bond next year, for example, but most if not all of that is just helping local governments pay off debts.

China being the largest creditor doesn't mean much when a lot of their debt is issued to belt and road countries that can never be paid back, and will be written off in the future. It does have a large US debt holdings, but that has shrank from 1.27T (2013) to 772B (2024), and a large part of that being used for cross border transactions.

[roenxi]

> Deflation when coupled with huge and increasing debt to service, then you have a crippling problem.

Individuals have a problem. Corporations have a problem. China may or may not have a problem. It depends on how reasonable their bankruptcy laws are. Cleaning out the system of people who aren't using capital effectively is a healthy thing to do.

And I have to say, this idea that we should focus on China's debts and dismiss their credits is suspect. I mean sure, if we ignore all the assets and income streams then they do have a problem. But that isn't reasonable. You can't ignore the strengths to make an argument they are weak.

[kayewiggin]

Let me put it in another way; it's similar to the US banks during 2008, when they appeared to be healthy, holding lots of subprime loans on their books.

If we are talking about China's credit, China has a lot of subprime loans to belt and road countries that have very little income, and lot of subprime loans to their citizens, which recently a scholar reported that 900M of them make less than $400/month.