this post was submitted on 09 Apr 2025
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[–] [email protected] 31 points 3 days ago (1 children)

China uses debt differently. Local governments are not allowed to borrow money directly, so they use companies to borrow money for public works. The system is called local government financing vehicle(lgfv). They usually get land, which they sell or lease to get some money or to secure loans. It is usually understood that local governments would bail lgfv out. The issue with lgfv is that they owe more money then the GDP of China and it is secured with mostly real estate, which is somewhat on the edge of crashing. Chinese real estate is crazy overvalued, so popping that bubble can hurt China badly.

The difference is that China is in a trade war with the US. The US is in a trade war with the rest of the world.

[–] [email protected] 8 points 3 days ago

This is one of the better explanations on the China debt + real estate connections I've read. Thank you